What type of risk is reduced by increasing the number of stocks in a portfolio?
Default |
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Inflation |
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Systematic |
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Unsystematic |
The answer is Unsystematic
Note:
The Unsystematic risk is the risk specific to a particular company or any particular market. If more stocks are added to any portfolio, the risk can be avoided by diversification.
Default risk is the risk that any company might not be able to meet its obligations.
Inflation risk is the risk that due to an inflation the inflows of the company would lose its value.
Systematic risk is the risk that cannot be diversified and affects one and all in the market.
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