CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

An investor seeking to capitalize on a strong market upswing reduces her money market holdings and greatly increases her holdings of stocks. This investor is primarily increasing ______.
A. total risk
B. systematic risk
C. non-market risk
Explanation: Money market instruments are risk-free or low risk, while stocks have significant systematic or market-related risk. Thus, increasing her stock position effectively increases her systematic risk exposure.

User Contributed Comments 3

User Comment
dini85 increasing his stock position effectively ... will increase his unsystematic risk as well...then Y not total risk ?
Ryno he can always diversify away his unsystematic risk.
Tom0409 Sorry I don't understand this? increased stocks does not imply a market portfolio? If the question stated purchased an S&P ETF portfolio then I would agree with answer B. As the question states stocks, its not clear that non-systemic risk has been diversified out of the portfolio?
You need to log in first to add your comment.