Which of the Following Statements Is True in the Context

question 62

Multiple Choice

Which of the following statements is true in the context of diversification?

• A)As long as the return on different investments is not perfectly positively correlated, financial intermediaries can diversify away significant amounts of portfolio risk.
• B)As long as the return on different investments is not perfectly negatively correlated, financial intermediaries can diversify away significant amounts of portfolio risk.
• C)As long as the return on different investments is perfectly positively correlated, financial intermediaries can diversify away significant amounts of portfolio risk.
• D)None of the listed options are correct.

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Definitions:

Highly Concentrated

Describes a market or industry dominated by a small number of firms, leading to reduced competition and possibly higher prices and lower output.

Kaiser Aluminum

A key company in the aluminum industry, known for its operations worldwide.

Oligopoly

A market structure characterized by a small number of firms dominating the market, leading to competitive yet collusive behavior among the firms.

Mutual Interdependence

A condition in which the actions of one participant in a market or industry significantly affect others, typically seen in oligopolistic markets.