As Diversification Increases, the Unique Risk of a Portfolio Approaches

question 45

Multiple Choice

As diversification increases, the unique risk of a portfolio approaches

• A) 1.
• B) 0.
• C) infinity.
• D) (n −1) × n.

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Definitions:

FIFO

"First In, First Out," an inventory valuation method where the oldest stock is sold first.

Tax Purposes

The reasonings or rationalizations related to the computation and payment of taxes, often guiding how financial transactions are structured or reported.

LIFO

Last-In, First-Out, an inventory valuation method where the most recently produced items are recorded as sold first.

Cost Flow Assumption

Accounting methods that companies use to assign costs to inventory and cost of goods sold, such as FIFO, LIFO, and weighted average cost.