Question

If an investor is willing to bear market risk, what is the best investment strategy to exploit their acceptance of market risk?[A] The best risk management technique in this situation would be to eliminate the unsystematic risk from their portfolio.[B] The best risk management technique would be to only invest in stocks with a beta of 1.0 or less.[C] The best risk management technique would be to buy insurance policies that would cover all of the investor's losses.[D] The best risk management technique would be to invest in Treasury Bonds in an emergency fund as an aside to their normal portfolio.

Answer 1

Answer:

Option A is the correct answer to this question

Explanation:

In a case where an investor accepts to bear some amount of risk in their portfolio, the best strategy for investment will be those that take advantage of that acceptance of risk, while still ensuring that other manageable risks are minimized. As long as an individual was not opposed to accepting market and systematic risk, it is normal to want to exploit that, but also eliminate much unsystematic risk as can be eliminated.