Diversiﬁcation can effectively reduce risk.Once a portfolio is diversiﬁed, the type of risk remaining is:
A)individual security risk.
B)riskless security risk.
C)risk related to the market portfolio.
D)total standard deviations.
E)None of the above.

Question

Quizplus · Accepted Answer

Diversification can effectively reduce or eliminate unsystematic risk, which is the risk associated with individual securities. However, systematic risk, which is related to the market as a whole (also known as market risk), cannot be eliminated through diversification.

Diversiﬁcation Can Effectively Reduce Risk