Some People Argue That There Are Two Advantages to Holding

question 14

Multiple Choice

Some people argue that there are two advantages to holding mutual funds.The first is that mutual funds provide an inexpensive way to hold a diversified portfolio.The second is that because of their expertise mutual fund managers should be able to consistently beat the market.Which of the following does the evidence show?

• A)Diversification does reduce risk and mutual funds typically outperform the market.
• B)Diversification does reduce risk,but mutual funds do not typically outperform the market.
• C)Diversification does not reduce risk but mutual funds typically outperform the market.
• D)Diversification does not reduce risk and mutual funds do not typically outperform the market.

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Definitions:

Fashion

The widespread custom or style of behavior and appearance at a particular time or in a particular place.

Free Rider

A term used in economics and political science to describe individuals who benefit from resources, goods, or services without paying for them or contributing to their provision.

Pledge Drives

Fundraising efforts, often conducted by public broadcasting stations, where viewers or listeners are encouraged to make donations to support the station.

Public Good

A product or service that is provided without profit for the benefit of all members of society, such as public parks, clean air, and national defense.