Which of the Following Is the Best Definition of Principle

question 295

Multiple Choice

Which of the following is the best definition of principle of diversification?

• A) A theory showing that the expected return on any risky asset is a linear combination of various factors.
• B) A risk that affects at most a small number of assets. Also called unique or asset-specific risks.
• C) A risk that influences a large number of assets. Also called market risk.
• D) Positively sloped straight line displaying the relationship between expected return and beta.
• E) Principle stating that spreading an investment across a number of assets eliminates some, but not all, of the risk.

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Definitions:

Total Sales

The aggregate revenue generated from all goods and services sold by a company within a specific period.

Contribution Margin

The amount by which sales revenue exceeds variable costs of production, used to cover fixed costs and generate profit.

Net Income

The total earnings of a company after subtracting all expenses, including taxes and operating costs, indicative of its profitability.

Sales Mix

The combination of different products or services that a company sells, each contributing to total sales revenue.