The Principle of Diversification Tells Us That

question 59

Multiple Choice

The principle of diversification tells us that

• A)concentrating a portfolio in three companies within the same industry will greatly reduce the overall risk of a portfolio.
• B)concentrating a portfolio in two or three large stocks will eliminate all of a portfolio's risk.
• C)spreading an investment across many diverse assets will eliminate all of a portfolio's risk.
• D)spreading an investment across many diverse assets will lower a portfolio's level of risk.
• E)spreading an investment across five diverse companies will not lower a portfolio's level of risk.