In Order to Reduce Risk, One Should Diversify into Areas

question 54

True/False

In order to reduce risk, one should diversify into areas that are positively correlated with current areas of involvement.

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Definitions:

Dividends in Arrears

Unpaid dividends on cumulative preferred stock that must be paid out before any dividends can be issued on common stock.

Preferred Shareholders

Investors who own preferred shares of a company, which typically offer dividends before common stock and have priority in asset liquidation.

Voting Rights

The rights of shareholders to vote on corporate matters, typically exercised at annual meetings.

Fixed Dividend

A type of dividend payment on preferred stock that remains constant and does not fluctuate with the earnings of the company.