Knowing How Major Competitors React Gives the Company Clues on How

question 13

Multiple Choice

Knowing how major competitors react gives the company clues on how best to ________ competitors or how best to ________ the company's current positions.

• A) remove; decrease
• B) attack; increase
• C) attack; defend
• D) value; change
• E) decrease; defend

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Definitions:

Expected Risk Premium

The additional return over the risk-free rate that investors demand to compensate for the risk of holding a risky asset.

Systematic Risk Principle

The concept that an investor can reduce the overall risk of an investment portfolio through diversification, except for inherent market risks that cannot be diversified away.

Efficient Markets Hypothesis

The efficient markets hypothesis is an investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information.

Security Market Line

A representation in finance that shows the relationship between risk and return of a market.