Diversification can eliminate
A)all risk in a portfolio.
B)the idiosyncratic risk in a portfolio.
C)the market risk in a portfolio.
D)risk only if the saver is risk neutral.

Question

Quizplus · Accepted Answer

Diversification can eliminate the idiosyncratic risk in a portfolio, meaning risk specific to individual securities. However, it cannot eliminate market risk, which affects all securities in the market. It is also important to note that diversification does not eliminate all risk in a portfolio, as there is always some level of uncertainty and volatility in the market.

Diversification Can Eliminate