Which of the following statements is true?
A) A well-diversified portfolio has negligible systematic risk.
B) A well-diversified portfolio has negligible unsystematic risk.
C) An individual security has negligible systematic risk.
D) An individual security has negligible unsystematic risk.
E) Both A well-diversified portfolio has negligible systematic risk; and An individual security has negligible unsystematic risk.

Question

Quizplus · Accepted Answer

A well-diversified portfolio can still have some level of systematic risk due to factors that affect the entire market or economy. However, unsystematic risk can be minimized through diversification, as it is the risk that is specific to individual securities. Therefore, B is the correct statement - a well-diversified portfolio has negligible unsystematic risk.

Which of the Following Statements Is True