The Ability of Diversification to Reduce Risk

question 74

Multiple Choice

The ability of diversification to reduce risk

• A) is greater the more negatively correlated the two events are.
• B) is greater the more positively correlated the two events are.
• C) is greater the more uncorrelated the two events are.
• D) is greater the more risk averse the individual is.

Demonstrate knowledge of financial engineering and the creation of new financial instruments.

Analyze the effects of global events on financial markets and institutions.

Understand the foundations and criticisms of various personality theories.

Describe and critique the methods used to measure personality variables.

---

Definitions:

Encoding

The process of converting information into a form that can be stored in memory, an integral step in the learning and memory process.

Information-Processing

The means by which information is stored, retrieved, and utilized by the brain or in computational systems.

Retrieval Ability

The capacity to access and recover information from memory, significant in various contexts including learning, decision-making, and problem-solving.

Cognitive Factors

Mental processes involved in perception, memory, judgment, and decision-making that influence behavior.