Diversification Can Effectively Reduce Risk

question 13

Multiple Choice

Diversification can effectively reduce risk.Once a portfolio is diversified, the type of risk remaining is:

• A)individual security risk.
• B)riskless security risk.
• C)risk related to the market portfolio.
• D)total standard deviations.
• E)None of the above.

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Definitions:

Federal Income Tax

A charge imposed by the federal government of the United States on the yearly income of entities such as individuals, corporations, trusts, and various legal bodies.

Corporation

A legal entity recognized by law, created by individuals or shareholders, with rights and liabilities distinct from those of its owners.

Attract Capital

Strategies or actions taken by businesses to draw in investment funds from outside sources.

Fiduciary Duty

An obligation to act in the best interest of another party, such as a trustee for a beneficiary, including acting with loyalty and care.