Diversification Reduces the Risk of a Portfolio Because ________ and Some

question 41

Multiple Choice

Diversification reduces the risk of a portfolio because ________ and some of the risks are averaged out of the portfolio.

• A)stocks do not move identically
• B)stocks have common risks
• C)stocks are unpredictable
• D)stocks are always affected by the market
• E)some stocks have lower returns than others

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Definitions:

Tariffs

Taxes imposed on imported goods, often used to protect domestic industries or generate revenue.

Imported Goods

Products brought into one country from another for the purpose of sale or trade.

Trade Imbalance

Trade imbalance occurs when there is a significant difference between a country's imports and exports, affecting its economic health.

Financial Crises

are situations where the value of financial institutions or assets drops significantly, leading to a collapse in the economy and causing widespread economic disruption.