All of the Following Are True Regarding a Shareholder's Diversified

question 100

Multiple Choice

All of the following are true regarding a shareholder's diversified stock portfolio except which one?

• A)The portfolio will contain the stock of just one company.
• B)The diversified portfolio reduces the risk faced by the shareholders.
• C)The portfolio will contain stocks from a variety of companies.
• D)The shareholder has balanced the risk of bad outcomes with positive outcomes.

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Definitions:

Call Option

A financial contract that gives the holder the right, but not the obligation, to buy a specified amount of an underlying asset at a set price within a specific time frame.

American Option

A category of options agreement allowing execution at any moment prior to its expiry date.

European Option

A type of financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on the option's expiration date.

Exercise

In financial contexts, it refers to the act of invoking the right to buy or sell the underlying asset as specified in a derivatives contract, such as options or warrants.