Which of the Following Is Most Likely to Occur as You

question 79

Multiple Choice

Which of the following is most likely to occur as you add randomly selected stocks to your portfolio,which currently consists of 3 average stocks?

• A) The diversifiable risk of your portfolio will likely decline,but the expected market risk should not change.
• B) The expected return of your portfolio is likely to decline.
• C) The diversifiable risk will remain the same,but the market risk will likely decline.
• D) Both the diversifiable risk and the market risk of your portfolio are likely to decline.
• E) The total risk of your portfolio should decline,and as a result,the expected rate of return on the portfolio should also decline.

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Definitions:

Double Declining-Balance Method

A method of accelerated depreciation that doubles the straight-line depreciation rate, reducing the asset's book value more quickly in its early years.

Double Declining Balance

An accelerated method of depreciation which doubles the rate at which an asset is depreciated compared to the straight-line method.

Straight-Line Method

This approach spreads the cost of a fixed asset evenly over its expected productive life, ensuring a consistent depreciation expense each year.

Impairment

A reduction in the recoverable value of an asset below its carrying amount on the balance sheet, reflecting a decline in the asset's utility.