Diversification will not lower the ____ risk:
A) total risk.
B) systematic risk.
C) unsystematic risk.
D) variance risk.
E) standard error.

Question

Quizplus · Accepted Answer

Diversification will lower unsystematic risk, which is also called company-specific risk and can be diversified away by investing in different companies. However, systematic risk, which is the risk that cannot be eliminated through diversification as it is caused by macroeconomic factors affecting the entire market, cannot be lowered through diversification. Therefore, option B is correct, as diversification does not lower systematic risk.

Diversification Will Not Lower the ____ Risk