Which of the Following Statements Is CORRECT

question 19

Multiple Choice

Which of the following statements is CORRECT?

• A) "Characteristic line" is another name for the Security Market Line.
• B) The characteristic line is the regression line that results from plotting the returns on a particular stock versus the returns on a stock from a different industry.
• C) The slope of the characteristic line is the stock's standard deviation.
• D) The distance of the plot points from the characteristic line is a measure of the stock's market risk.
• E) The distance of the plot points from the characteristic line is a measure of the stock's diversifiable risk.

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Definitions:

Diversification

A risk management strategy that involves spreading investments across various financial instruments, industries, or other categories to reduce exposure to any one particular risk.

Ethical Expectation

The moral standards or codes of conduct expected by a society, organization, or professional group from its members.

Sustainable Development

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs, emphasizing a balance between economic growth, environmental care, and social well-being.

Stockholders' Interests

concerns or priorities of shareholders, often related to the profitability and governance of a company, aiming to maximize their investment returns.