The Principle of Diversification Tells Us That

Multiple Choice

The principle of diversification tells us that:

A) concentrating an investment in three companies all within the same industry will greatly reduce the overall risk of a portfolio.
B) concentrating an investment in two or three large stocks will eliminate all of a portfolio's risk.
C) spreading an investment across many diverse assets will eliminate all of a portfolio's risk.
D) spreading an investment across many diverse assets will lower a portfolio's level of risk.
E) spreading an investment across five diverse companies will not lower a portfolio's level of risk.