The Main Reason for Diversifying a Portfolio Is

question 41

Multiple Choice

The main reason for diversifying a portfolio is

• A)to take advantage of the fact that returns on assets are imperfectly correlated.
• B)to take advantage of the favorable tax treatments diversified portfolios receive from the federal government.
• C)that diversified portfolios have greater liquidity than undiversified portfolios.
• D)that diversified portfolios have lower information costs than undiversified portfolios.

Identify the significant financial and real assets and liabilities within the U.S. banking and non-banking sectors.

Comprehend the protective measures for shareholders against management incompetence.

Understand the basics of security selection and investment strategies.

Recognize the mechanisms evolved to mitigate potential agency problems.