Answer (D) is correct . Unsystematic risk, also called company or diversifiable risk, is the risk inherent in a particular investment security. Since individual securities are affected by the particular strengths and weaknesses of the issuer, this risk can be offset through portfolio diversification.
Answer (A) is incorrect because Systematic risk, also called market or undiversifiable risk, is the risk faced by all firms. Since all investment securities are affected, this risk cannot be offset through portfolio diversification.
Answer (B) is incorrect because Undiversifiable risk is another name for market risk.
Answer (C) is incorrect because Liquidity risk is the risk that a security cannot be sold on short notice for its market value.
