Which of the Following Statements Is True

question 19

Multiple Choice

Which of the following statements is true?

• A) Diversification reduces idiosyncratic risk but not aggregate risk.
• B) Diversification reduces aggregate risk but not idiosyncratic risk.
• C) Diversification reduces both idiosyncratic risk and aggregate risk but it reduces idiosyncratic risk by more.
• D) Diversification requires an investor to hold at least 100 shares in her portfolio to begin to reduce risk significantly.

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Definitions:

Price Elasticity

A measure that shows the responsiveness of the quantity demanded of a good to a change in its price.

Cucumbers

A long, green, cylindrical vegetable widely used in salads and pickling, known for its crisp texture and refreshing taste.

Inverse Demand Function

A mathematical function that expresses the price of a good or service as a function of the quantity demanded, illustrating how price can depend on demand.

Quantity Demanded

refers to the specific amount of a good or service that consumers are willing and able to buy at a given price over a certain period of time.