Diversification is more promising risk-mitigation strategy

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For each of the following scenarios, say whether pooling or diversification is a more promising risk-mitigation strategy.

a. Employees of a company who receive their salaries and health insurance from their employer and also invest their savings in that company’s stocks: Diversification or Pooling.

b. Families who are worried about losing their possessions if their houses burn down: Diversification or Pooling.

c. Neighbouring farmers who grow the same crop, which is prone to failure in dry years: Diversification or Pooling.

Reference no: EM13838578

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