Which of the Following Is True

question 184

Multiple Choice

Which of the following is true?

• A)Risk declines at a constant rate with diversification.
• B)Risk declines sharply with diversification and then increases as the number of stocks held increases.
• C)Risk declines sharply with diversification and then levels out as the number of stocks held increases.
• D)Risk declines sharply with the number of shares of a stock held.
• E)Risk increases at a constant rate with the number of stocks held.

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Definitions:

Annual Rate of Return

The percentage of profit or loss made from an investment in a year, taking into account both capital gains and interest or dividends received.

Operating Expenses

Expenses incurred in the process of earning sales revenue.

Incremental Effect

The impact of a particular decision on a company's finances, considering only the changes that directly result from the decision.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenues.