Which Explanation Below Is Most Appropriate in Explaining Why Diversification

question 54

Multiple Choice

Which explanation below is most appropriate in explaining why diversification can reduce investment risk?

• A)The greater the number of assets held,the greater the portfolio return.
• B)The greater the risk taken,the greater the portfolio return.
• C)Asset returns are often poorly correlated.
• D)Asset returns tend to be stable over time.

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Definitions:

Limited Partnership

A business structure where at least one partner is liable only to the extent of the amount of money they have invested.

Limited Partners

Investors in a partnership who have limited liability to the extent of their investment and typically do not partake in the day-to-day management of the business.

General Partners

are owners of a partnership who bear unlimited liability for the debts and obligations of the business.

Expelled

The act of being officially removed or barred from an institution or organization.