The Primary Purpose of Portfolio Diversification Is To

question 27

Multiple Choice

The primary purpose of portfolio diversification is to:

• A)increase returns and risks.
• B)eliminate asset-specific risk.
• C)eliminate all risks.
• D)lower both returns and risks.
• E)eliminate systematic risk.

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Definitions:

Total Surplus

The combined measure of consumer surplus and producer surplus in a market, representing the total benefits to society from the production and consumption of goods and services.

Equilibrium

A state where market supply and demand balance each other, and as a result, prices become stable.

Pumpkin Market

The economic environment or system where pumpkins are bought, sold, or traded.

Equilibrium Price

The cost at which the amount of a product available matches the amount of the product sought after.