Which of the Following Is a Correct Statement About Diversification

question 245

Multiple Choice

Which of the following is a correct statement about diversification?

• A) Most diversification benefits are realized with just 10 stocks.
• B) Diversification is the process of reducing the riskiness associated with individual assets by spreading an investment across numerous assets.
• C) Diversifiable risk is the only risk that matters to a rational investor.
• D) When a stock is combined into a portfolio, the standard deviation of that portfolio remains unchanged.
• E) There is no limit to the amount of risk that can be eliminated through diversification.

---

Definitions:

Haptics

The science and technology of transmitting and understanding information through touch.

Proxemics

The study of how people use and perceive the physical space around them, including personal distance and territory.

Kinesics

The study of communication through body movements, gestures, and facial expressions rather than through verbal language.

Decentralized Decision Making

A process in which decision-making authority is distributed throughout an organization rather than being centralized in a single point of authority.