VLC UNICU International diversification is important because it on Select one: O a

Finance Dec 03, 2020

VLC UNICU International diversification is important because it on Select one: O a. Reduces risk and increases retum O b. Increases risk and reduces return O c. Reduces risk and reduces return O d. Increases return but also increases risk

Expert Solution

A. Reduces Risk and Increases Returns

Under diversification, all independent risks, even risks of catastrophe, can be reduced to an acceptable level by including more securities in the portfolio, but in an international market this could increase the transaction costs, and hence the returns, considerably.

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