SIE Exam Question 746: Answer and Explanation

Question: 746

Which of the following is correct regarding non-systematic risk?

• A. It includes risks such as tax risk and financial risk.
• B. An investor who owns five growth stocks can reduce non-systematic risk by adding a value stock to her portfolio.
• C. It is the risk associated with a particular security or company.
• D. All of the above are correct.

Correct Answer: D

Explanation:

Non-systematic risk is the risk associated with a particular security or company. It includes risks such as tax risk and financial risk. An investor who owns five growth stocks can reduce non-systematic risk by adding a value stock to her portfolio.