Why Does Diversification Reduce Risk

question 34

Essay

Why does diversification reduce risk?

Understand the concept and importance of strategic planning in businesses.

Recognize the role of environmental analysis in strategic planning.

Comprehend the ethical considerations in management and the impact of ethical leadership.

Identify opportunities arising from sociocultural trends for small businesses.

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Definitions:

Floating-Rate Bonds

Bonds with variable interest rates that adjust periodically based on a benchmark or index rate.

Future Interest Rates

Future interest rates refer to the anticipated rates at which borrowers will be charged for loans or the return investors will earn on deposits, based on predictions.

Increase

A rise in the quantity or value of something, such as profits, revenue, weight, etc.

Put Provision

A clause in a bond or other security that allows the holder to force the issuer to buy back the security before its maturity date.