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    Question

    Compared to investing in a single security, diversification provides investors a way to _______

    A Increase the expected rate of return Correct Answer Incorrect Answer
    B Decrease the volatility of returns Correct Answer Incorrect Answer
    C Increase the total returns Correct Answer Incorrect Answer
    D Remove risk altogether Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Diversification may or may not provide higher returns but reduces the risk of the portfolio. This is also no guarantee for removal of total risk.

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