Idiosyncratic risk:
A)can be eliminated through diversification.
B)is unique to a particular company or asset.
C)is generally absent from index funds.
D)All of these are true.

Question

Quizplus · Accepted Answer

Idiosyncratic risk is risk that is specific to a particular company or asset, and cannot be eliminated through diversification. Therefore, option A is incorrect. This type of risk is also not present in index funds, which are designed to provide broad market exposure and minimize company-specific risk. So option C is also incorrect. Finally, the correct answer is option D, which states that all of the answer choices are true.

Idiosyncratic Risk