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Unsystematic risk in a portfolio context is best described as:
ARisk arising from broad market movements
BInflation risk affecting all assets uniformly
CSovereign risk arising from political events
DRisk specific to a firm that can be diversified away
Answer & Solution
Correct answer: D. Risk specific to a firm that can be diversified away
1. Identify what the question asks: this concept maps to unsystematicrisk (§4.1.2).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (D).
_Source: ICAI BoS CA Final Paper 2, Ch 6 "Portfolio Management"_
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