April, who currently owns stock in four companies, has decided to expand her portfolio by purchasing stock in virtually every company that sells stock. In doing so, April will
A)increase the risk of her portfolio.
B)decrease some, but not all, of the risk of her portfolio.
C)decrease all of the risk of her portfolio.
D)leave the risk of her portfolio unchanged from its present level.

Question

Quizplus · Accepted Answer

By diversifying her portfolio and purchasing stock in a wide range of companies, April will decrease unsystematic risk, which is the risk specific to individual companies. However, she cannot eliminate systematic risk, which affects the entire market.

April, Who Currently Owns Stock in Four Companies, Has Decided