TRUE or FALSE

"Diversification is the "magic" by which combining a set of non-perfectly correlated assets always results in a portfolio whose risk is lower than the weighted average of the single assets' risks".

(Selectall correct statementsbelow.)

A.The above statement is TRUE because each individual stock contains firm-specific risk, which can be eliminated when we combine stocks into a portfolio.

B.The above statement isFALSE becausethere is no free lunch.Diversification is not a sufficient condition to reduce the risk of a portfolio as compared to the weighted average of the single assets' risks

C.The above statement isFALSE becausediversification has an impact on the expected return of the portfolio but not on its volatility.

D.The above statement isTRUE becausethe risk of the combination is lower than the combination of risks.