As randomly selected securities are combined to create a portfolio, the ________ risk of the portfolio decreases until 10 to 20 securities are included. The portion of the risk eliminated is ________ risk, while that remaining is ________ risk.
A) diversifiable; nondiversifiable; total
B) relevant; irrelevant; total
C) total; diversifiable; nondiversifiable
D) total; nondiversifiable; diversifiable

Question

Quizplus · Accepted Answer

The risk that can be eliminated through diversification is known as diversifiable risk, while the risk that cannot be eliminated and remains is called nondiversifiable risk.

As Randomly Selected Securities Are Combined to Create a Portfolio