The Ability of an Economic Agent to Reduce Risk by Holding

question 22

Multiple Choice

The ability of an economic agent to reduce risk by holding a number of securities in a portfolio is called:

• A)asset management
• B)efficiency
• C)arbitrage
• D)diversification

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Definitions:

Inventory

Goods and materials a business holds for the ultimate goal of resale or production.

Section 1231

This is a section of the U.S. Internal Revenue Code that provides favorable tax treatment for gains and losses on the sale or exchange of certain types of property used in a trade or business.

Capital Losses

Capital losses occur when the sale of a capital asset, such as stocks or real estate, results in a loss, which can offset capital gains for tax purposes.

Carry Forward

A tax policy that allows individuals or companies to use a current year's tax losses to offset future taxable income.