Question

As the number of securities in a portfolio increases (say, from 15 to 25 assets), much of the ___________ risk of the portfolio is eliminated; the majority of the risk remaining in the portfolio is ____________ risk.

		systematic;        diversifiable
		total;                  unsystematic
		unsystematic;    market
		total;                  systematic

Answer 1

As the number of securities in a portfolio increases (say, from 15 to 25 assets), much of the unsystematic risk of the portfolio is eliminated; the majority of the risk remaining in the portfolio is market risk

There are two types of risk - Diverifiable and Non-Diverdifiable risk. The total risk of a portfolio is the sum of Diversifiable risk and market risk. Diversifiable also, known as the Unsystematic risk can easily be eliminated through diversification whereas the other risk called Non-diversifiable or Market risk or Systematic risk is the risk because of market forces and it cannot be eliminated by adding more securities in the portfolio (diversification)

Answer -> unsystematic; market