The Ability of Diversification to Eliminate Much of the Risk

question 36

True/False

The ability of diversification to eliminate much of the risk from the asset side of the balance sheet of an FI is the result of choosing assets that are less than perfectly positively correlated.

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Definitions:

Sensation Seeking

The tendency to seek out thrilling and exciting experiences, often taking physical, social, legal, or financial risks for such experiences.

Intense Experience

A deeply engaging or powerful event that has a profound effect on an individual's emotional and psychological state.

Myers-Briggs Type Indicator

A personality inventory that categorizes individuals into one of 16 personality types based on preferences in how they perceive the world and make decisions.

Sensation-Seeking Scores

Measures used to quantify an individual's propensity to seek varied, novel, complex, and intense sensations and experiences.