Diversification Is the Principle Of

question 69

Multiple Choice

Diversification is the principle of:

• A) eliminating risk.
• B) reducing the risk we carry to just two.
• C) holding more than one asset to reduce risk.
• D) eliminating investments from our portfolio that have idiosyncratic risk.

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Definitions:

Interest Rate

The cost of borrowing money, expressed as a percentage of the total amount loaned, paid by borrowers to lenders.

Present Value

The contemporary valuation of an anticipated sum of money or cash flow sequence, based on a given return rate.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time.