Diversification Reduces the Risk of a Portfolio Because ________ and Some

question 41

Multiple Choice

Diversification reduces the risk of a portfolio because ________ and some of the risks are averaged out of the portfolio.

• A)stocks do not move identically
• B)stocks have common risks
• C)stocks are unpredictable
• D)stocks are always affected by the market
• E)some stocks have lower returns than others

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Definitions:

Online Movie Rentals

A service that allows consumers to rent movies digitally over the internet for a limited period.

Price of Movie Tickets

The amount of money charged for admission to a movie screening.

Substitute

An alternative product or service that consumers can turn to if the original product or service becomes unavailable or too expensive.

Ambiguous Effect

An ambiguous effect refers to an outcome or result that is unclear or can have multiple interpretations, often leading to uncertain impacts in economic analyses.