By Diversifying,the Risk of Holding Stock

question 42

Multiple Choice

By diversifying,the risk of holding stock

• A)can be eliminated.On average over the past two centuries stocks paid a higher average real return than bonds.
• B)can be eliminated.On average over the past two centuries stocks paid a lower average real return than bonds.
• C)can be reduced but not eliminated.On average over the past two centuries stocks paid a higher average real return than bonds.
• D)can be reduced but not eliminated.On average over the past two centuries stocks paid a lower average real return than bonds.

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Definitions:

Cost of Goods Sold

The historical cost of products sold as reported in the income statement.

Gross Profit

The difference between revenue and the cost of goods sold, indicating the profitability of a company's core activities.

Goods Available for Sale

The total quantity of goods that a company has in its stock ready to sell at the end of a financial period.

Absorption Costing

An accounting method that includes all manufacturing costs — direct materials, direct labor, and both variable and fixed overhead — in the cost of a product.