Which of the following statements is not true?
A) Portfolio diversification implies that investors earn a return above the risk-free rate that compensates for the risk inherent in each and every security.
B) The risk of the market portfolio is less than the sum of each security's risk.
C) The risk premium depends the systematic risk of securities.
D) All of the statements above are true.

Question

Quizplus · Accepted Answer

Portfolio diversification does not guarantee a return above the risk-free rate; it aims to reduce unsystematic risk by holding a variety of assets. The return above the risk-free rate (risk premium) is not guaranteed for each security but is related to the market's overall performance and the security's systematic risk.

Which of the Following Statements Is Not True