Portfolio diversification eliminates which one of the following?
A)Total investment risk
B)Portfolio risk premium
C)Market risk
D)Unsystematic risk
E)Reward for bearing risk

Question

Quizplus · Accepted Answer

Portfolio diversification eliminates unsystematic risk, which is the risk associated with individual assets or companies, by spreading investments across different assets, industries, and sectors. However, it does not eliminate market risk or total investment risk, nor does it reduce the reward for bearing risk. The portfolio risk premium may decrease as a result of diversification, but it is not completely eliminated.

Portfolio Diversification Eliminates Which One of the Following