A firm might be willing to accept high risk in a given investment if the portfolio effect (for the whole firm) were beneficial.

Question

Quizplus · Accepted Answer

The portfolio effect refers to the potential benefits that come from diversifying investments across a range of assets or securities. By spreading risk across different investments, a firm can reduce the overall risk of its portfolio. Therefore, if a high-risk investment can enhance the diversification of a firm's portfolio and reduce its overall risk, then the firm might accept that investment despite its high level of risk.

A Firm Might Be Willing to Accept High Risk in a Given