Firms Do Not Usually Get Rewarded by Diversifying Investments in Different

question 75

Multiple Choice

Firms do not usually get rewarded by diversifying investments in different lines of business because ________.

• A) the capital markets are efficient and they quickly respond to change in economic conditions
• B) cash flows from such projects tend to respond less to changing economic conditions
• C) investors themselves can diversify by holding securities in a variety of firms; they do not need the firm to do it for them
• D) it is not possible for a firm to diversify its risk as the inflation premium is different for different projects

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Definitions:

Deteriorate

The process of becoming progressively worse or declining in condition, quality, or function.

Schizophrenia

A long-term mental disorder involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception and actions.

Schizophrenia

A complex mental disorder that affects how a person thinks, feels, and behaves, often characterized by delusions, hallucinations, and disordered thinking.

Mental Health

A state of well-being in which an individual realizes their own abilities, can cope with the normal stresses of life, work productively, and is able to make contributions to their community.