Which of the Following Statements Is True

question 42

Multiple Choice

Which of the following statements is true?

• A)Diversification serves to both increase your expected return and lower your risk.
• B)By diversifying, you can have the same expected return with less risk exposure.
• C)In a diversified portfolio, all the assets' returns are perfectly positively correlated.
• D)Diversification reduces both your expected return and your risk.

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Definitions:

Treasury Stock

Shares that were once part of the outstanding shares but were bought back by the issuing company.

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Paid-In Capital

The total amount of money that a company has received from shareholders in exchange for shares of stock, exceeding the par value of the shares.

Stock Split

An action by a company to increase the number of its outstanding shares by issuing more shares to current shareholders, usually to make the stock more affordable.