As any investor can create a portfolio of assets that will eliminate all, or virtually all, nondiversifiable risk, the only relevant risk is diversifiable risk.

Question

Quizplus · Accepted Answer

This statement is incorrect. The relevant risk for any investor is a combination of diversifiable and nondiversifiable risk. While diversifying a portfolio can help reduce nondiversifiable risk, it cannot eliminate it completely. Nondiversifiable risk, also known as market risk, refers to factors such as changes in interest rates, inflation, and economic conditions that can affect the entire market. These risks cannot be eliminated through diversification and must be considered when making investment decisions.

As Any Investor Can Create a Portfolio of Assets That