Unsystematic risk:
A)can be effectively eliminated through portfolio diversiﬁcation.
B)is compensated for, by the risk premium.
C)is measured by beta.
D)cannot be avoided if you wish to participate in the ﬁnancial markets.
E)is related to the overall economy.

Question

Quizplus · Accepted Answer

Unsystematic risk refers to the risk associated with a specific company or industry and can be reduced or eliminated through diversification of the portfolio. Therefore, choice A is the correct answer. The other options are incorrect: B is referring to the total risk, C is related to the systematic risk, D is incorrect as unsystematic risk can be avoided through portfolio diversification, and E is related to the overall risk in the economy.

Unsystematic Risk