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Portfolio diversification eliminates Select one: a. systematic risk b. the market risk premium. c. All of...

Portfolio diversification eliminates Select one: a. systematic risk b. the market risk premium. c. All of these statements are true. d. unsystematic risk e. all investment risk.

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Answer #1

Answer

D. Unsystematic risk

Explanation

Portfolio Diversification is a process of investing our money in different asset classes and securities in order to minimize the overall risk of the portfolio.

The main purpose of portfolio diversification is to minimize the risk on your investments; specifically unsystematic risk. As we all know unsystematic risk is specific risk, this risk is related to the specific company or market segment. So By diversifying our portfolio we can eliminate the unsystematic risk

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