SIE Exam Question 402: Answer and Explanation

Question: 402

Single stock, or single sector, risk is more generally in the category described as:

• A. systematic risk
• B. market risk
• C. non-systematic risk
• D. economic risk

Correct Answer: C

Explanation:

C: Non-systematic risk is business risk --- the risk of putting all your eggs in one basket, in one company, in one business sector…..and if that business does badly, you lose. Diversification is a good way of mitigating this risk.