The Main Reason for Diversification for an Investor Is To

question 8

Multiple Choice

The main reason for diversification for an investor is to:

• A) take advantage of the fact that returns of assets are perfectly positively correlated.
• B) take advantage of the fact that returns on assets are not perfectly correlated.
• C) lower transaction costs.
• D) gain from the greater returns that come from greater risk.

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Definitions:

Indifference Curves

Graphical representations showing combinations of goods that provide the consumer with the same level of satisfaction.

Max And Min Functions

Mathematical functions used to determine the maximum or minimum value within a set of numbers.

Utility Function

A mathematical representation of how consumer preferences lead to choices under conditions of scarcity.

Units Of Nuts

Measurements or quantities of nuts, often used in dietary, nutritional, or culinary contexts.