Which of the Following Statements Is True

question 19

Multiple Choice

Which of the following statements is true?

• A) Diversification reduces idiosyncratic risk but not aggregate risk.
• B) Diversification reduces aggregate risk but not idiosyncratic risk.
• C) Diversification reduces both idiosyncratic risk and aggregate risk but it reduces idiosyncratic risk by more.
• D) Diversification requires an investor to hold at least 100 shares in her portfolio to begin to reduce risk significantly.

---

Definitions:

Commitment

The condition of being committed to a purpose, task, or objective.

Inspirational Appeals

Relates to a leadership or influence tactic that seeks to elicit enthusiasm or emotion by appealing to people’s values, ideals, or aspirations.

Rational Appeals

Persuasive techniques based on logical or reasoned arguments rather than emotional appeals.

Personal Appeals

Influencing tactics that leverage the personal relationship between the influencer and the target, often invoking loyalty or friendship.