Diversification of a Portfolio

question 118

Multiple Choice

Diversification of a portfolio

• A)can eliminate market risk,but it cannot eliminate firm-specific risk.
• B)can eliminate firm-specific risk,but it cannot eliminate market risk.
• C)increases the portfolio's standard deviation.
• D)is not necessary for a person who is risk averse.

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Definitions:

Gradually

In a manner that involves slow progression or changes over time.

Social Cognition

The study of how people process, store, and apply information about other people and social situations.

Process Information

Refers to the methods and activities involved in acquiring, interpreting, and utilizing data or facts.

Empathy

The ability to understand and share the feelings of another, showing an awareness of and sensitivity to their emotional state.