Personal Finance
Personal Finance
7th Edition
ISBN: 9780134989969
Author: Madura, Jeff
Publisher: Pearson,
Question
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Chapter 18, Problem 1RQ
Summary Introduction

To discuss: The reason for its significance to diversify the financial holdings over the financial assets

Expert Solution & Answer
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Explanation of Solution

It is not possible to find the investment that provides the highest return for a particular investment period. Assets that are with a known return will provide a lower overall return as there is less or no risk. The investments that are with a higher return will have a greater risk element as the future performance is not certain. Thus, diversification reduces the risk of the investor to the single asset.

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