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.

---

Definitions:

Desert Soil

Soil found in arid regions, characterized by low organic matter, lack of moisture, and often high salinity levels.

Equatorial Africa

A region located around the equator in Africa, known for its dense tropical rainforests, diverse ecosystems, and humid climate.

Rain Forests

Dense, typically tropical forest regions receiving a high amount of rainfall annually, home to a vast diversity of plants and animals.

Hydrothermal Vent

Place where hot, mineral-rich water streams out from an underwater opening in Earth’s crust.