Which of the following best illustrates diversification?
A)A company that produces many different products decides to produce fewer.
B)After selling stock, corporate management spends funds on projects with greater risks than shareholders had anticipated.
C)Instead of holding only the stocks of companies engaged in the banking business, a person decides to hold stock in a number of different companies producing different goods and services.
D)A person decides to purchase only stocks that have paid high dividends in the past.

Question

Quizplus · Accepted Answer

Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio. By holding stock in a number of different companies producing different goods and services, a person is spreading their investment risk across various industries, which is a classic example of diversification.

Which of the Following Best Illustrates Diversification