Non-diversifiable risk:
A) can be cut almost in half by simply investing in 10 stocks provided each stock is in a different industry.
B) can almost be eliminated by investing in 35 diverse securities.
C) remains constant regardless of the number of securities held in a portfolio.
D) has little, if any, impact on the actual realized returns for a diversified portfolio.
E) should be ignored by investors.

Question

Quizplus · Accepted Answer

Non-diversifiable risk, also known as systematic risk, is inherent in the market and cannot be eliminated by diversifying a portfolio. It is caused by factors such as changes in interest rates, inflation, and political instability, and affects all securities in the market. Therefore, the level of non-diversifiable risk remains constant regardless of the number of securities held in a portfolio.

Non-Diversifiable Risk