Question

Unsystematic risk is risk which is common to all companies and can't be eliminated by diversification:

True

False

The minimum variance portfollio is defined as:

	a.	The lowest risk portfollio obtainable in the universe of possible portfollios
	b.	A portfollio comprised of a risky asset and a risk-free asset
	c.	The portfollio in a set of available efficient portfollios that has the lowest risk
	d.	The portfollio that has the lowest unsystematic risk

An inefficient portfollio is one where another available portfollio could be chosen with a higher return for
the same risk level:

True

False

Answer 1

Answer:- False

(Explanation:- The statement that "Unsystematic risk is risk which is common to all companies and can't be eliminated by diversification" is false as unsystematic risk is the one that is specific to companies or industries and it can be eliminated by diversification)

Answer: Option (c) :- The portfolio in a set of available efficient portfolios that has the lowest risk

( Explanation:- The minimum variance portfolio is that portfolio in a set of available efficient portfolios that has the lowest risk. Other options are not correct with respect to minimum variance portfolio )

Answer :- True

( Explanation:- It is true that an inefficient portfolio is one where another available portfolio could be chosen with a higher return for the same risk level because the other case in which another available portfolio could not be chosen with a higher return for the same risk level, it is called efficient portfolio)