Which of the Following Is Correct Concerning Diversification

question 2

Multiple Choice

Which of the following is correct concerning diversification?

• A)It only reduces firm-specific risk,but most of the reduction comes from increasing the number of stocks in a portfolio to well above 30.
• B)It only reduces firm-specific risk;much of the reduction comes from increasing the number of stocks in a portfolio from 1 to 30.
• C)It only reduces market risk,but most of the reduction comes from increasing the number of stocks in a portfolio to well above 30.
• D)None of the above is correct.

---

Definitions:

Average Value

The average value is a single number representing the central or typical value in a set of data, often calculated as the sum of all values divided by the number of values.

Margin Of Error

An expression of the amount of random sampling error in a survey's results, indicating the range within which the true value lies.

Sample

A subset of a population selected for measurement, observation, or questioning, to provide statistical information about the whole.

Complete Enumeration

A method of listing all possible outcomes or instances in a situation without omission.