The Primary Purpose of Portfolio Diversification Is To

question 76

Multiple Choice

The primary purpose of portfolio diversification is to:

• A) Increase returns and risks.
• B) Eliminate all risks.
• C) Eliminate asset-specific risk.
• D) Eliminate systematic risk.
• E) Lower both returns and risks.

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Definitions:

Intuition

A cognitive process that enables people to make decisions without the use of analytical reasoning.

Escalation of Commitment

A behavioral phenomenon where an individual or group continues to invest in a decision despite evidence of its failure, often because of the resources already committed.

Support

Support refers to the assistance or backing provided by individuals or groups, intended to aid someone else's efforts or initiatives.

Emotions

Complex psychological states that involve physiological changes, feelings, cognitive processes, and behavioral responses.