Portfolio Diversification

question 121

Multiple Choice

Portfolio diversification

• A)means that one should own at least 10 different stocks.
• B)means that one should own at least two different stocks whose prices do not always move in the same direction.
• C)means that one should own at least two different stocks.
• D)is something that can be achieved only by the very wealthy.
• E)means that one should own at least five different stocks whose prices do not always move in the same direction.

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Definitions:

Coupon Payment

The interest payment made to bondholders, typically semiannually, as a return on investment.

Coupon Bond

A bond that makes regular interest payments to its holders, named after the detachable coupons once used for interest payments.

Real Risk Free Rate

The rate of return on an investment with no risk of financial loss, after adjusting for inflation.

Inflation Premium

The additional interest rate that lenders charge borrowers to compensate for the loss of purchasing power due to inflation.