The pooling of risk is a _____ form of diversification that produces a payoff with a very _____ risk.
A)weak;large
B)weak;small
C)strong;large
D)strong;small

Question

Quizplus · Accepted Answer

The pooling of risk is a strong form of diversification because it spreads the risk among a large number of people or entities, reducing the impact of individual losses. This produces a payoff with a small risk, as the probability of a catastrophic event affecting the entire pool is low.

The Pooling of Risk Is a _____ Form of Diversification