Recommendations & StrategiesQuestion 66 of 110
An investor holds a portfolio of 30 stocks across many industries. Which risk remains that cannot be diversified away?
a.Business risk of one company
b.Industry-specific risk
c.Default risk of a single issuer
d.Systematic (market) risk
Explanation
Broad diversification across many companies and industries reduces unsystematic risks such as business, industry, and single-issuer default risk. However, systematic or market risk, arising from factors affecting the entire market like recessions or interest rate shifts, cannot be diversified away. This residual risk is measured by beta.
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