Caro has $10,000 to invest. Her best friend, Imelda, happens to be a stockbroker. Imelda tells Caro that her investments should be diversified. To make sure that Caro understand what diversification really means, Imelda asks her to rank a set of investment portfolios according to how diversified they are. Demonstrate how Caro's ranking is Most diversified or Least diversified

a. $10,000 in a mutual fund
b. $3,400 i n a mutual fund,
c. $3,00 in bonds, and $3,300 in a land purchase

This is the most diversified because it involves equal or almost equal amounts put into separate instruments which means that a loss will be less likely to affect this portfolio because a loss affecting one instrument might not affect the rest

2. a. $10,000 in a mutual fund

This is the second most classified because Mutual funds invest in a variety of instruments so investing in Mutual funds is akin to investing in a variety of instruments.

3. c. $5,000 in one stock and $5,000 in another stock

This is the third most diversified because even though it involves investing in separate stocks, stock still generally move together in terms of performance so if one stock suffers a loss, there is a high chance the other will too.

4. d. $10,000 in one stock

This is not diversified at all because all the funds are on one instrument.