Beginning with an investment in one company's securities,as we add securities of other companies to our portfolio,which type of risk declines?
A) Systematic risk
B) Market risk
C) Non-diversifiable risk
D) Unsystematic risk

Question

Quizplus · Accepted Answer

As we add securities of other companies to our portfolio, the unsystematic risk associated with a single company decreases due to diversification. Therefore, the best choice is D, i.e., unsystematic risk. Systematic risk, market risk, and non-diversifiable risk are not affected by diversification.

Beginning with an Investment in One Company's Securities,as We Add