To Diversify, a Person Who Already Holds Stocks That Move

question 206

Multiple Choice

To diversify, a person who already holds stocks that move in the opposite direction of the stock market as a whole should:

• A) always buy more of the same stocks.
• B) buy stocks that move in the same direction of the stock market as a whole.
• C) buy stocks that have about the same expected returns as the stocks she already holds.
• D) sell all her stocks immediately.

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Definitions:

Rate of Return

The gain or loss on an investment over a specific period, expressed as a percentage of the investment's initial cost.

Annual Dividend

A yearly payment made by a corporation to its shareholders, often derived from profits.