Which of the Following Statements Is Correct

question 12

Multiple Choice

Which of the following statements is correct?

• A) Uncorrelated assets have a correlation of −1.0.
• B) Most common stocks are positively correlated with each other because they are impacted by the same economic factors.
• C) We can typically add many stocks together to fully eliminate the market risk in a portfolio.
• D) None of these choices are correct.

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Definitions:

Price-Earnings Ratio

A valuation metric for a company's current share price relative to its per-share earnings, indicating how much investors are willing to pay for each dollar of earnings.

Earnings Per Share

A financial metric that calculates the portion of a company's profit allocated to each outstanding share of common stock.

Market Price

The present cost at which a service or asset is available for purchase or sale.

Par Value Common Stock

The nominal or face value assigned to common shares in the charter of a corporation, which has little relation to the market value.