Unsystematic risk:
A)is related to the overall economy.
B)is measured by beta.
C)is compensated for by the risk premium.
D)cannot be avoided if you wish to participate in the financial markets.
E)can be effectively eliminated through portfolio diversification.

Question

Quizplus · Accepted Answer

Unsystematic risk, also known as company-specific risk or diversifiable risk, can be effectively eliminated through portfolio diversification. By spreading investments across different companies or industries, the impact of any one company's performance on the overall portfolio is reduced, and the risk is diversified. The other options are not true for unsystematic risk.

Unsystematic Risk