Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Does the Broader Diversification Increase Expected Return?
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Step 1
Diversification is investing money in a wide range of investments, not in a single investment. It is a risk management strategy as investing in different investments helps to reduce the risk associated. The risk for a person in investing in a single investment is higher than diversifying the money in different investments. Diversification reduces its exposure to risk.
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