.Final answer:
An increase in the exchange rate is likely to have little, if any, effect on a well-diversified portfolio compared to other factors such as a terroristic attack, explosion, increase in market interest rates, or rising inflation. Considering as a, b, c and d option number d is correct.
Step-by-step explanation:
A well-diversified portfolio is one that includes a mix of different types of investments, such as stocks, bonds, and real estate, across various industries and countries. The goal of diversification is to reduce risk by spreading investments across different assets. Out of the options provided, an increase in the exchange rate is likely to have little, if any, effect on a well-diversified portfolio.
When the exchange rate increases, it means that the value of one currency has strengthened relative to another. While this can have an impact on international investments, in a well-diversified portfolio, the effect of an exchange rate increase can be mitigated by investing in a mix of different currencies. For example, if the exchange rate between the US dollar and the euro increases, the value of US dollar-denominated investments may decrease, but the value of euro-denominated investments could increase.
Therefore, an increase in the exchange rate is less likely to have a significant impact on a well-diversified portfolio compared to other factors such as a terroristic attack, explosion, increase in market interest rates, or rising inflation.