Diversification Can Effectively Reduce Risk

question 98

Multiple Choice

Diversification can effectively reduce risk. Once a portfolio is diversified,the type of risk remaining is:

• A) individual security risk.
• B) riskless security risk.
• C) risk related to the market portfolio.
• D) total standard deviations.
• E) None of these.

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Definitions:

Contrast

The state of being strikingly different from something else in juxtaposition or close association.

Stereotypes

Oversimplified generalizations about a group of people that often ignore individual differences.

Prejudice

Preconceived opinions or judgments about people or groups that are not based on reason or actual experience, often leading to discrimination.

Attitude

A learned tendency to consistently respond positively or negatively to people or events.