If Your Portfolio Currently Consists of Common Stock in Three

question 2

Multiple Choice

If your portfolio currently consists of common stock in three companies, you could increase your diversification by all of the following, except

• A) selling one of the companies and putting the money in a bond.
• B) selling one of the companies and putting the money in a REIT.
• C) buying another stock.
• D) selling one of the companies and putting the money in the other two.

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Definitions:

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price.

Deadweight Loss

An inefficiency in the economy caused by the lack of or inability to attain equilibrium in the market for a particular good or service.

Inelastic

Describing a situation where the demand or supply for a product does not significantly change in response to a change in price.

Excise Tax

A tax levied on specific goods, services, or transactions, often with the aim of reducing their consumption.