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.

Question

Quizplus · Accepted Answer

Diversification can significantly reduce or eliminate individual security risk (also known as unsystematic risk) by holding a wide variety of investments. The risk that remains is related to the market as a whole, known as systematic risk or market risk, which cannot be diversified away. This is because systematic risk affects all investments to some degree.

Diversification Can Effectively Reduce Risk