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22 January, 04:07

Diversifying a portfolio across various sectors and industries might do more than one of the following. However, this diversification must do which one of the following?

a. Increase the expected risk premium

b. Reduce the beta of the portfolio to one Increase the security's risk premium

c. Reduce the portfolio's systematic risk level

d. Reduce the portfolio's unique risks

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  1. 22 January, 05:07
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    The correct answer here is D) Reduce the portfolio's unique risk.

    Explanation:

    A portfolio can be defined as the group of assets held by an investor and diversification is a practice through which investment is made in various assets classes to reduce the risk.

    Through this diversification, a portfolio's unique risk (which is the unsystematic risk) or also know as firm specific risk or asset specific risk can be reduced.
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