The six principles of finance include (1)Money has a time value,(2)Higher returns are expected for taking on less risk,(3)Diversification of investments can increase risk,(4)Financial markets are inefficient in pricing securities,(5)Manager and stockholder objectives may differ,and (6)Reputation matters.

Question

Quizplus · Accepted Answer

The statement "Diversification of investments can increase risk" is incorrect. Diversification actually helps reduce risk by spreading investments across different types of assets and sectors. The correct principle is "Diversification of investments can reduce risk."

The Six Principles of Finance Include (1)Money Has a Time