To Diversify, a Person Who Already Holds Stocks That Move

question 206

Multiple Choice

To diversify, a person who already holds stocks that move in the opposite direction of the stock market as a whole should:

• A) always buy more of the same stocks.
• B) buy stocks that move in the same direction of the stock market as a whole.
• C) buy stocks that have about the same expected returns as the stocks she already holds.
• D) sell all her stocks immediately.

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Definitions:

Stabilize Output

An economic strategy aiming to maintain consistent levels of production and minimize fluctuations in an economy.

Unemployment Insurance

Unemployment insurance is a government program that provides temporary financial assistance to individuals who have lost their job through no fault of their own, aiming to mitigate economic hardship.

Federal Reserve

The Federal Reserve is the central banking system of the United States, responsible for monetary policy, regulation of financial institutions, and stability of the financial system.

Interest Rates

The cost of borrowing money or the rate paid for deposits, typically expressed as a percentage.