SIE Exam Question 891: Answer and Explanation

Question: 891

If a portfolio has a beta of 1.0, what type of risk does the portfolio have?

• A. Diversifiable risk
• B. Non-systematic risk
• C. Systematic risk
• D. Both non-systematic and diversifiable risk

Correct Answer: C

Explanation:

A portfolio with a beta of 1.0 will move in the same direction as the overall stock market. Therefore, the portfolio has only market risk, also known as systematic risk.