Which of the Following Is a Correct Statement About Diversification

question 64

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.

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Definitions:

Managerial Function

Key roles and actions performed by managers to plan, organize, lead, and control an organization.

Monitoring Performance

The continuous process of tracking and evaluating the effectiveness and outcomes of tasks, operations, or systems.

Henry Mintzberg

A renowned academic and author in the fields of business and management, known for his work on organizational structures, strategy, and management roles.

Managerial Roles

Specific categories of behavior that managers are expected to perform, including interpersonal, informational, and decisional roles.