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:

Pay Equity

A principle of employee compensation where individuals are paid equally for work of equal value, without discrimination based on gender or other factors.

Simple Random Sample

A subset of a statistical population in which each member has an equal probability of being chosen.

Faculty Members

Individuals who are members of the teaching or academic staff at an educational institution.

Mean

The arithmetic average of a set of numbers, calculated by adding all the numbers in the set and dividing by the count of those numbers.