Investors can eliminate what type of risk by diversifying?a.Total riskb.Unsystematic riskc.Beta riskd.Systematic risk

Step 1: Break Down the Problem

To determine what type of risk investors can eliminate through diversification, we need to understand the distinctions between the types of risks mentioned in the options.

Step 2: Relevant Concepts

1. Total Risk: This is the overall risk associated with an investment, which includes both systematic and unsystematic risks.
2. Unsystematic Risk: This is specific to a particular company or industry; it can be mitigated through diversification of investments.
3. Beta Risk: This refers to the risk attributed to the overall market movement. It is a measure of systematic risk and cannot be eliminated by diversification.
4. Systematic Risk: This refers to the risk that affects the entire market or a particular segment. It stems from factors like economic changes and cannot be eliminated through diversification.

Step 3: Analysis and Detail

• By diversifying, investors can spread their investments over various asset classes, industries, or companies, effectively reducing their exposure to specific company or industry risks.
• Unsystematic risk can be minimized because individual asset performance can vary greatly; therefore, holding a variety of investments can buffer against losses in any single investment.
• Systematic risk, which is tied to market movements, cannot be mitigated through diversification and will always be present regardless of how diversified an investor's portfolio is.

Step 4: Verify and Summarize

From the definitions and explanations above, we can summarize that the type of risk that can be eliminated through diversification is unsystematic risk.

Final Answer

b. Unsystematic risk