1.The process of eliminating unsystematic risk through the purchase of a number of assets is called:

a)	Portfolio reduction.

b)	The systematic risk principle.

c)	The beta principle.

d)	The risk-reward slope.

e)	Portfolio diversification.

2.

Unsystematic risk is defined as the risk that:

a)	Affects almost every financial asset that is sold in the marketplace.

b)	Relates to the overall economy, such as inflation and GDP growth.

c)	Serves as the basis for determining the amount of the risk premium.

d)	Is derived from an event that affects a single firm or a limited number of assets.