Correct answer is D, not sure how A is possible.

(c) Diversification lowers the potential risk of the portfolio 3. Which of the following is not possible when two securities are positively correlated: (a) Asset A's mean return is negative while asset B's is positive (b) Asset A's return is sometimes below its mean when asset B's is above its mean (c) Asset A's mean return is negative while asset B's mean return is also negative (d) All are possible 4. A security can be in one of four states next year