CFA® Level 1: CFA® Level 1

Which of the following statements is true?

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A. One-half of all mutual funds are 95% or more diversified, providing one of their most important benefits. Studies have also found that most mutual funds have maintained the stability of their correlation with the market, and of their risk-adjusted returns.

B. Three-quarters of all mutual funds are 90% or more diversified, providing one of their most important benefits. Studies also have found that most mutual funds have maintained the stability of their correlation with the market, and of their risk class.

C. Three-quarters of all mutual funds are 95% or more diversified, providing one of their most important benefits. Studies also have found that most mutual funds have maintained the stability of their correlation with the market, but not of their risk class.

D. Three-quarters of all mutual funds are 80% or more diversified, providing one of their most important benefits. But studies also have found that most mutual funds have not maintained the stability of their correlation with the market, or of their risk class. B

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A. B. C. D.

Explanation

Diversification is one of the main benefits of mutual funds. Most funds are highly diversified, and tend to keep their level of diversification with the market. They also tend to maintain the same risk class, if not consistent risk-adjusted returns.

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