Question

The principle of diversification tells us that: Select one: a. concentrating an investment in two or three large stocks will eliminate all of your risk. b. spreading an investment across many diverse assets will eliminate some of the risk. c. spreading an investment across many diverse assets will eliminate all of the risk. d. concentrating an investment in three companies all within the same industry will greatly reduce your overall risk. e. spreading an investment across five diverse companies will not lower your overall risk at all.

Answer 1

Answer:

The answer is "Option E".

Explanation:

Please find the complete question in the attached file.

Varied portfolios and mixes of diversified assets get a different relationship, eliminating uncontrolled danger and only risk premium. Its total risk is a combination of non - systematic and systematic risks. Therefore, the diversification principle reduces some portion of the risk profile, and that is why distributing an investment across a range of varied assets reduces some of the risk profile.