Which of the following is defined as the portion of total risk that is attributable to firm or industry factors and can be reduced through diversification?
A) Firm specific risk
B) Market risk
C) Modern portfolio risk
D) Total risk

Question

Quizplus · Accepted Answer

Firm specific risk, also known as unsystematic risk or idiosyncratic risk, is the portion of total risk that is specific to a particular company or industry and can be reduced through diversification. Market risk, on the other hand, is the risk that affects all companies in the market and cannot be diversified away. Modern portfolio theory is a framework for constructing investment portfolios based on optimization and diversification. Total risk includes both firm specific risk and market risk.

Which of the Following Is Defined as the Portion of Total