A well-diversified portfolio is defined as A)one that is diversified over a large enough number of securities that the nonsystematic variance is essentially zero. B) one that contains securities from at least three different industry sectors. C) a portfolio whose factor beta equals 1.0. D) a portfolio that is equally weighted.

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Quizplus · Accepted Answer

A well-diversified portfolio is one that contains a large number of securities, each having a small (but not necessarily equal) weight, so that nonsystematic variance is negligible.

A Well-Diversified Portfolio Is Defined as