Which of the Following Statements Is CORRECT

question 107

Multiple Choice

Which of the following statements is CORRECT?

• A) When diversifiable risk has been diversified away,the inherent risk that remains is market risk,which is constant for all stocks in the market.
• B) Portfolio diversification reduces the variability of returns on an individual stock.
• C) Risk refers to the chance that some unfavorable event will occur,and a probability distribution is completely described by a listing of the likelihoods of unfavorable events.
• D) The SML relates a stock's required return to its market risk.The slope and intercept of this line cannot be controlled by the firms' managers,but managers can influence their firms' positions on the line by such actions as changing the firm's capital structure or the type of assets it employs.
• E) A stock with a beta of -1.0 has zero market risk if held in a 1-stock portfolio.

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Definitions:

Monarchical

Pertaining to a monarchy, a form of government in which a single figure, the monarch, acts as the head of state within the parameters of a constitution or laws.

Hierarchical Society

A society in which individuals or groups are ranked one above the other based on status or authority.

Dominant Group

The social group considered to have the most power, influence, and rights in a particular context or society.

Gender-typing

The process of associating objects, roles, or traits with one gender over another, often reinforcing traditional gender roles and stereotypes.