An investor who buys a large number of shares from different companies and from many different industries will:
A) abolish systematic risk.
B) minimise unsystematic risk.
C) minimise credit risk.
D) minimise price risk.

Question

Quizplus · Accepted Answer

By buying a large number of shares from different companies and industries, the investor is diversifying their portfolio and thus reducing unsystematic risk. Systematic risk, also known as market risk, cannot be eliminated and affects the overall market. Credit risk refers to the risk of default by the issuer of a security and is not directly affected by diversification. Price risk, or market price risk, refers to the potential for an investment's value to decrease due to changes in market conditions, and again, diversification can partially mitigate but not eliminate this risk.

An Investor Who Buys a Large Number of Shares from Different