During the Most Recent Recession, Many People Temporarily Lost Substantial

question 3

Multiple Choice

During the most recent recession, many people temporarily lost substantial value in their retirement investment portfolios because most of the assets (including stocks, bonds, and real estate) all declined in value at the same time. In hindsight, what was the problem with these portfolios?

• A) The portfolios were not adequately diversified because the assets were negatively correlated, so all of the assets had negative returns at the same time.
• B) The portfolios were not adequately diversified because the assets were more positively correlated than expected, so all of the assets had negative returns at the same time.
• C) The portfolios were adequately diversified, but the assets should have been more positively correlated to protect against recession risk.
• D) The investors should not have diversified their investments to protect against recession risk.

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Definitions:

Intercultural Communication

The process of sending and receiving messages between people whose cultural backgrounds could lead them to interpret verbal and nonverbal signs differently.

Verbal

Relating to words or the use of words, especially in contrast to actions or visual representations.

Nonverbal Signs

Forms of communication without words, including gestures, facial expressions, and body language, that convey messages.

Workplace Diversity

The inclusion of individuals of varying gender, race, ethnicity, age, sexual orientation, religion, and other attributes in a professional setting.