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      Question

      A company invests in different assets simultaneously in

      order to reduce risks. What is this strategy called?
      A Multiple investments Correct Answer Incorrect Answer
      B Diversification Correct Answer Incorrect Answer
      C Risk reduction Correct Answer Incorrect Answer
      D Shared partnership Correct Answer Incorrect Answer
      E Investment maximization Correct Answer Incorrect Answer

      Solution

      This strategy is called diversification. Diversification helps prevent the risk of investing into a single asset whose price can fluctuate and be unpredictable. By spreading out the investment into various assets, the risk from fluctuations of one single asset can be reduced.

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