The Principle of Diversification Tells Us That

question 116

Multiple Choice

The principle of diversification tells us that:

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

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Definitions:

Motivation

The process that initiates, guides, and maintains goal-oriented behaviors, driven by the desire to fulfill a need or achieve a goal.

Basic Characteristics

Fundamental or inherent qualities or attributes that define or determine the nature of something.

Specific High Goal

A clearly defined, ambitious objective that an individual or group strives to achieve.

Complex Task

A task that involves multiple steps, considerations, or skill sets, often requiring significant effort and problem-solving.