In a well diversified portfolio
A)market risk is negligible.
B)systematic risk is negligible.
C)unsystematic risk is negligible.
D)nondiversifiable risk is negligible.
E)none of the above.

Question

Quizplus · Accepted Answer

A well diversified portfolio helps to minimize unsystematic risk or specific risk that is unique to individual companies. However, systematic or market risk cannot be fully eliminated, as it is caused by factors affecting the entire market or economy. Nondiversifiable risk is another name for systematic risk, so it cannot be negligible in a well diversified portfolio. Therefore, the only correct option is C - unsystematic risk is negligible.

In a Well Diversified Portfolio