Kurt decided to increase the number of stocks in his portfolio.In doing so,Kurt reduced
A)both the firm-specific risk and the market risk of his portfolio.
B)the firm-specific risk,but not the market risk of his portfolio.
C)the market risk,but not the firm-specific risk of his portfolio.
D)neither the market risk nor the firm-specific risk of his portfolio.

Question

Quizplus · Accepted Answer

By increasing the number of stocks in his portfolio, Kurt reduced the firm-specific risk as he has diversified across different companies. However, it does not necessarily mean that he reduced the market risk, as there may still be systematic factors affecting all the stocks in his portfolio.

Kurt Decided to Increase the Number of Stocks in His