Which of the following statements is true?
A) Systematic, or market, risk can be reduced through diversification.
B) Both systematic and unsystematic risk can be reduced through diversification.
C) Unsystematic, or company, risk can be reduced through diversification.
D) Neither systematic nor unsystematic risk can be reduced through diversification.

Question

Quizplus · Accepted Answer

Unsystematic risk, also known as specific or idiosyncratic risk, is unique to a particular company or industry and can be reduced through diversification. Diversification involves spreading investments across various sectors or asset classes to reduce exposure to any single asset or risk. Systematic risk, on the other hand, affects the entire market and cannot be mitigated just by diversifying the portfolio.

Which of the Following Statements Is True