Diversification Involves Investing All Your Money In

question 26

Multiple Choice

Diversification involves investing all your money in:

• A)one company.
• B)the same type of financial assets, with the same amount of risk.
• C)a variety of financial assets, with varying amounts of risk.
• D)None of these are true.

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Definitions:

Budget Line

A visual diagram showing every pairing of two items that a person can purchase within their budget constraints, based on their earning and the cost of these products.

Consumption Bundles

These are combinations of different goods and services that an individual consumes, representing a mix of choices according to their preferences and budget.

Income

Earnings received by individuals or entities, typically in the form of wages, salaries, rents, interest, or profits, available for spending or saving.

Substitution Effect

The shift in buying habits caused by a change in the relative costs of products, prompting consumers to substitute pricier options with more affordable ones.