The Principle of Diversification Tells Us That

question 43

Multiple Choice

The principle of diversification tells us that:

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

---

Definitions:

Department Stores

Large retail establishments that offer a wide variety of goods in different departments under one roof.

Industrial Output

The total volume of products and services produced by an industry, often used as an indicator of industrial activity and economic health.

Internal Combustion

A process where fuel is burned within an engine, producing power through the expansion of gases.