Which of the Following Is True About Portfolio Diversification

question 26

Multiple Choice

Which of the following is true about portfolio diversification?

• A)It reduces performance stability.
• B)It increases dependence on a single product.
• C)It allows a business to take advantage of offsetting product life cycles.
• D)It restricts a business to a single market.
• E)It reduces opportunity for growth.

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Definitions:

Default Probability

The likelihood that a debtor will fail to make required payments on their debt.

Monthly Interest Rate

The interest rate that is applied on a monthly basis to the principal of a loan or mortgage to calculate the monthly interest payment.

Net Present Value

A valuation method that calculates the present value of an investment's expected cash flows, minus the initial investment cost.

Monthly Interest Rate

The percentage of interest that is charged or earned on a loan or investment over a month's time period.