Which of the Following Statements Is Most Correct Concerning Diversification

question 19

Multiple Choice

Which of the following statements is most correct concerning diversification and risk?

• A) Risk-averse investors often choose companies from different industries for their portfolios because the correlation of returns is less than if all the companies came from the same industry.
• B) Risk-averse investors often select portfolios that include only companies from the same industry group because the familiarity reduces the risk.
• C) Only wealthy investors can diversify their portfolios because a portfolio must contain at least 50 stocks to gain the benefits of diversification.
• D) Proper diversification generally results in the elimination of risk.

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Definitions:

Negotiation

A process of discussion aimed at reaching an agreement or compromise between parties with different needs or interests.

Coercion Practices

These are methods or practices involving the use of force or intimidation to obtain compliance or control over others.

Transformational Leaders

Leaders who inspire and motivate their followers to exceed expectations and facilitate profound, systemic changes.

Financial Cost

The total amount of money that is spent to produce goods or services, including materials, labor, and other expenses.