Which of the Following Statements About Diversification Is/are Correct

question 13

Multiple Choice

Which of the following statements about diversification is/are correct?
I.Diversification may be able to reduce the risk of a portfolio to less than the weighted average risk of the assets.
II.Diversification is always prudent and should be expanded to include new, unrelated products whenever possible.

• A)Only statement I is correct
• B)Only statement II is correct
• C)Both statements I and II are correct
• D)Neither statement I nor II is correct

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Definitions:

Revenues

Revenues are the total amount of money generated by a company from its business activities, such as the sale of goods or services, before any costs or expenses are deducted.

Interest Rate

The interest rate is the cost of borrowing money or the return earned from lending money, typically expressed as a percentage of the principal amount per year.

Payoff

The return or reward received from a particular action or investment, often analyzed in decision-making processes.

Insurance

A financial arrangement that provides protection against potential loss to life, health, or property in exchange for premium payments.