Which of the Following Statements About Diversification Is Incorrect

question 9

Multiple Choice

Which of the following statements about diversification is incorrect?

• A) Risk-bearing financial institutions employ diversification.
• B) Diversification reduces risk.
• C) Mutual funds typically have a diversified portfolio.
• D) Diversification requires that all investments have the same risk/return characteristics.

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Definitions:

Unemployment Benefits

Cash transfers to those who lose their jobs and actively seek employment.

Incentive

An incentive is a motivational factor or reward that encourages an individual or group to perform certain actions or behaviors, widely used in economics, business, and psychology to influence decisions.

Unemployed

A term describing individuals who are capable of working, actively seeking work, but unable to find a job.

Full Employment

A situation in which all available labor resources are being used in the most efficient way possible, implying minimal involuntary unemployment.