Question

georgia has an investment portfolio of five stocks. two of the stocks are energy companies, and three are computer manufacturers. to which of the following types of risk is georgia's portfolio subject, and why? a) purchasing power risk, because stock portfolios struggle to keep up with inflation b) systematic risk, because there are only two industry sectors c) credit risk, because the portfolio is lacking bonds d) unsystematic risk, because there are only five stocks across two sectors

Answer 1

Georgia has an investment portfolio of five stocks. Types of risk is georgia's portfolio subject is unsystematic risk, because there are only five stocks across two sectors.

Option D is correct.

What's an effective portfolio?

An effective portfolio is either a portfolio that offers the loftiest anticipated return for a given position of threat, or one with the smallest position of threat for a given anticipated return. The line that connects all these effective portfolios is the effective frontier.

What's unsystematic threat?

Unsystematic threat is also known as specific threat, meaning the troubles that are unique to a single company or assiduity. still, these pitfalls don't only do one establishment at a time. For illustration, a poor director might pose a specific threat to a single company's stock price.

Learn more about unsystematic risk:

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