Question #20
Reading: Reading 36 Using Multifactor Models
PDF File: Reading 36 Using Multifactor Models.pdf
Page: 9
Status: Incorrect
Correct Answer: A
Your Answer: C
Question
Diversification can reduce:
Answer Choices:
A. systematic risk
B. unsystematic risk
C. macroeconomic risks
Explanation
Systematic risk reflects factors that have a general effect on the security markets as a
whole, and cannot be diversified away. Macroeconomic risk comes in many forms, and it is
usually considered systematic risk. Unsystematic risk can be reduced through
diversification.