The Principal of Diversification Involves Investing in a Variety of Assets

question 25

Multiple Choice

The principal of diversification involves investing in a variety of assets with which one of the following being the primary goal?

• A)increasing returns
• B)minimizing taxes
• C)reducing some of the risk
• D)eliminating all of the risk
• E)increasing the variance

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, including utilities, maintenance, and factory management expenses, not directly tied to specific units produced.

Variable Product Cost

Costs that vary directly with the volume of production, such as materials and labor directly involved in manufacturing.

Fixed Period Cost

Costs that remain constant for a specific period of time regardless of the level of output or activity.

Administrative Cost

Expenses related to the general operation of a company, including office salaries, utilities, and legal fees, but not including production costs.