What Lesson Can Be Learned from the 2008 Market Decline

question 73

Multiple Choice

What lesson can be learned from the 2008 market decline?

• A)Stocks and bonds react similarly in downward markets.
• B)Diversification lowers risk.
• C)Market declines cause high inflation rates.
• D)Global markets all react exactly the same.
• E)Equity risk premiums will decline in the future.

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Definitions:

Benefits

The advantages or positive outcomes gained from a product or action.

Sunk Cost

Costs that have already been incurred and cannot be recovered, which should not affect future investment or business decisions.

Outsourcing

The practice of contracting out certain business functions or processes to a third-party provider.

Fixed Cost

Fixed cost refers to expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance.