Which risk can be diversified away as additional securities are added to a portfolio?
I.Total risk
II.Systematic risk
III.Firm specific risk
A) I only
B) I and II only
C) I, II, and III
D) I and III

Question

Quizplus · Accepted Answer

Total risk can be reduced through diversification, including firm specific risk, but not systematic risk, which is the risk inherent to the overall market and cannot be diversified away. Therefore, choice II is incorrect.

Which Risk Can Be Diversified Away as Additional Securities Are