The Principle of Diversification Tells Us That

question 179

Multiple Choice

The principle of diversification tells us that:

• A) Concentrating an investment in two or three large stocks will eliminate all of your risk.
• B) Concentrating an investment in two large stocks will cut your risk exactly in half.
• C) Spreading an investment across many diverse assets cannot (in an efficient market) eliminate any risk.
• D) Spreading an investment across many diverse assets will eliminate all of the risk.
• E) Spreading an investment across many diverse assets will eliminate some of the risk.

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Definitions:

Outsourcing Scope

The extent or range of services and functions delegated to external entities by a company.

Increasing Volume

This term refers to situations where the quantity of products or services being produced or sold is growing over time.

Decreasing Volume

A situation where the amount or quantity of something, such as product production or sales, is reducing over time.

North American Trend

Refers to prevailing patterns, movements, or inclinations within the North American market or cultural context.