Asked by Linda Rydberg on May 26, 2024
Verified
As diversification increases, the unsystematic risk of a portfolio approaches
A) 1.
B) 0.
C) infinity.
D) (n −1) × n.
Unsystematic Risk
The segment of risk that is unique to a specific company or industry, also known as diversifiable risk, which can be mitigated through diversification.
Diversification
Spreading a portfolio over many investments to avoid excessive exposure to any one source of risk.
Portfolio
A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including mutual funds and ETFs.
- Grasp the concepts of diversification, systematic risk, and unsystematic risk in portfolio management.
Verified Answer
Learning Objectives
- Grasp the concepts of diversification, systematic risk, and unsystematic risk in portfolio management.
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