Final answer:
The statement is false because both systematic and unsystematic risk are relevant in determining the expected return on an individual asset. However, in the context of a diversified portfolio, unsystematic risk is considered irrelevant because it can be eliminated through diversification.
Step-by-step explanation:
The statement 'No matter how much total risk an asset has, only the unsystematic portion is relevant in determining the expected return on that asset.' is false. In finance, the expected return on an asset considers both systematic (market) and unsystematic (specific) risk. Systematic risk affects the entire market and is not diversifiable, while unsystematic risk is unique to a specific company or industry and can be diversified away.
According to the Capital Asset Pricing Model (CAPM), the expected return of an asset is determined by the risk-free rate plus the asset's systematic risk, represented by its beta coefficient, times the market risk premium. The unsystematic risk is considered irrelevant for well-diversified portfolios because it's assumed that it can be eliminated through diversification. Therefore, in the context of a diversified portfolio, unsystematic risk does not affect the expected return, but for an individual asset, investors do consider both types of risks.