- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 2. Portfolio Risk and Return: Part II
- Subject 2. Systematic Risk and Unsystematic Risk
CFA Practice Question
_______ risk can be diversified away.
B. Unsystematic
C. Total
A. Systematic
B. Unsystematic
C. Total
Correct Answer: B
Unsystematic Risk: Risk of an investment that is random in nature. It is not related to general market movements. It may represent the temporary influence of a competitor's new product, changes in raw material prices, or unusual economic or government influences on a firm. It may generally be diversified away.
Systematic Risk: Risk inherent in an investment, related to movements in the market that cannot be diversified away.
Unsystematic Risk: Risk of an investment that is random in nature. It is not related to general market movements. It may represent the temporary influence of a competitor's new product, changes in raw material prices, or unusual economic or government influences on a firm. It may generally be diversified away.
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