The minimum-variance zero-beta portfolio most likely has some ______.

A. systematic and unsystematic risk
B. unsystematic risk and no systematic risk
C. systematic risk and no unsystematic risk

Correct Answer: B

Specifically within the set of feasible alternative portfolios, several portfolios exist where the returns are completely uncorrelated with the market portfolio; the beta of these portfolios with the market portfolio is zero. From among the several zero-beta portfolios, you would select one with minimum variance. This portfolio does not have any systematic risk (beta = 0), but it does have some unsystematic risk.