The Principle of Diversification Tells Us That

question 76

Multiple Choice

The principle of diversification tells us that:

• A)concentrating an investment in three companies all within the same industry will greatly reduce the overall risk of a portfolio.
• B)concentrating an investment in two or three large stocks will eliminate all of a portfolio's risk.
• C)spreading an investment across many diverse assets will eliminate all of a portfolio's risk.
• D)spreading an investment across many diverse assets will lower a portfolio's level of risk.
• E)spreading an investment across five diverse companies will not lower a portfolio's level of risk.

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Definitions:

Dissociative Amnesia

A psychological disorder characterized by temporary memory loss that cannot be attributed to normal forgetfulness, often related to trauma or stress.

Fugue

A fugue is a psychiatric disorder characterized by reversible amnesia for personal identity, including the memories, personality, and other identifying characteristics of individuality.

Repression

The psychological attempt by an individual to block off and push into the unconscious components of the psyche that are considered threatening or unacceptable.

Regressive

Characterized by a return to a former or less developed state, often in behavior or developmental stages.