Which of the Following Statements Is MOST Correct Concerning Diversification

question 136

Multiple Choice

Which of the following statements is MOST correct concerning diversification and risk?

• A) Diversification is mainly achieved by the selection of individual securities for each type of asset held in a portfolio.
• B) Diversification is mainly achieved by the asset allocation decision, not the selection of individual securities within each asset category.
• C) Large company stocks and small company stocks together in a portfolio lead to dramatic reductions in risk because their returns are negatively correlated.
• D) Asset allocation is important for pension funds but not for individual investors.

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Definitions:

Sexually Arousing Power

The capacity or ability of something or someone to evoke sexual interest, desire, or excitement.

Sexual Jealousy

A psychological state often arising from the perceived threat of losing a valued relationship to a rival.

Human Nature

Refers to the general psychological, physical, and behavioral traits that are considered inherent and universal in humans.

Jealousy

An emotion characterized by feelings of insecurity, fear, and concern over a relative lack of possessions or safety of one's rights or values, often in reference to a romantic interest.