Diversification Is the Reduction of Risk Achieved by Replacing a Single

question 21

Multiple Choice

Diversification is the reduction of risk achieved by replacing a single risk with a large number of

• A) greater risks.
• B) smaller unrelated risks.
• C) risk-free investments.
• D) risk-free purchases.

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Definitions:

Conspicuous Statement

A statement or notice that is made to stand out clearly and be easily noticed, often requiring a specific form of presentation to ensure visibility.

Negotiable Instrument

A document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payee’s name written on the document.

Negotiability

The characteristic of a financial instrument that allows it to be transferred or assigned from one party to another, facilitating commerce and trade.

Electronic Deposit

The transfer of funds directly into a bank account, eliminating the need for physical checks.