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Which two of the following are typically NOT identified as benefits of diversification? 1. Reduction in portfolio risk without sacrificing expected returns. 2. A reduction

Which two of the following are typically NOT identified as benefits of diversification? 1. Reduction in portfolio risk without sacrificing expected returns. 2. A reduction in the rate of return of a riskless asset. 3. Reduction in total risk of the portfolio. 4. Reduction in unsystematic risk of the portfolio. 5. Reduction in systematic risk of the portfolio.

A.

1 and 2.

B.

3 and 4.

C.

3 and 5.

D.

2 and 5.

E.

No, in fact, none of the pairs suggested above makes sense.

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