Asked by Rebecca Lovato on Jun 07, 2024
Verified
Diversification can reduce or eliminate ________ risk.
A) all
B) systematic
C) nonsystematic
D) only an insignificant
Diversification
A strategy to reduce risk by allocating investments among various financial instruments, industries, and other categories.
Nonsystematic Risk
The part of an investment's risk that is attributable to firm-specific or industry-specific factors and can be mitigated through diversification.
- Recognize the impact of diversification on risk reduction.
Verified Answer
NS
Nicholas SattaurJun 10, 2024
Final Answer :
C
Explanation :
Diversification can eliminate or reduce nonsystematic risk, which is the risk associated with a particular company or industry. Systematic risk, which is the overall market risk, cannot be eliminated through diversification. All risk cannot be eliminated through diversification as there is always some inherent uncertainty in investing.
Learning Objectives
- Recognize the impact of diversification on risk reduction.