A Portfolio Can Reduce Risk When Its

question 9

Multiple Choice

A portfolio can reduce risk when its

• A) investments do not move in tandem.
• B) investments move in tandem.
• C) returns of individual investments are similar.
• D) investments are from similar industries.

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Definitions:

Short-Sell

A trading strategy where an investor borrows a security and sells it on the open market, planning to buy it back later for less money.

Loss

The financial result of an activity when costs and expenses exceed the revenues or returns generated.

Bid and Ask Prices

The prices at which buyers are willing to buy (bid) and sellers are willing to sell (ask) a security or asset in the market.

Transaction Cost

Any expenses incurred when buying or selling securities, including broker's fees, taxes, and other charges that can impact the investor's net returns.