Multiple Choice
In the context of accounting, assigning business value to a team's performance improvement (PI) objectives primarily influences which of the following?
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1. Introduction to Accounting
Types of Accounting
Multiple Choice
Which of the following is the best example of a diversified portfolio?
A
A portfolio consisting only of technology company stocks
B
A portfolio containing stocks from different industries, government bonds, and real estate investments
C
A portfolio holding shares in a single multinational corporation
D
A portfolio made up entirely of government bonds
Verified step by step guidance1
Understand the concept of a diversified portfolio: A diversified portfolio is one that spreads investments across various asset classes, industries, and geographic regions to reduce risk. The goal is to avoid over-concentration in a single type of investment.
Analyze the first option: A portfolio consisting only of technology company stocks is not diversified because it is concentrated in a single industry, which increases risk if the technology sector performs poorly.
Evaluate the second option: A portfolio containing stocks from different industries, government bonds, and real estate investments is diversified because it includes multiple asset classes and industries, reducing overall risk.
Assess the third option: A portfolio holding shares in a single multinational corporation is not diversified because it relies on the performance of one company, which poses significant risk if the company faces challenges.
Review the fourth option: A portfolio made up entirely of government bonds is not diversified because it is concentrated in a single asset class, which limits potential returns and exposes the portfolio to interest rate risk.
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