Two risky assets can be combined to lower the overall risk of a portfolio. This principle is commonly referred to as
A) blending
B) asset allocation
C) diversification
D) portfolio segmentation

Question

Quizplus · Accepted Answer

The principle referred to is diversification, which involves combining different assets in a portfolio to spread the risk and reduce the overall risk of the portfolio. Blending refers to combining different types of investments within a single asset, asset allocation is the process of dividing a portfolio among different types of securities or asset classes, and portfolio segmentation is the process of dividing a portfolio into different segments based on investment approach or objective.

Two Risky Assets Can Be Combined to Lower the Overall