Which of the Following Statements Is CORRECT

question 86

Multiple Choice

Which of the following statements is CORRECT?

• A) If an investor buys enough stocks, he or she can, through diversification, eliminate all of the diversifiable risk inherent in owning stocks.Therefore, if a portfolio contained all publicly traded stocks, it would be essentially riskless.
• B) The required return on a firm's common stock is, in theory, determined solely by its market risk.If the market risk is known, and if that risk is expected to remain constant, then no other information is required to specify the firm's required return.
• C) Portfolio diversification reduces the variability of returns (as measured by the standard deviation) of each individual stock held in a portfolio.
• D) A security's beta measures its non-diversifiable, or market, risk relative to that of an average stock.
• E) A stock's beta is less relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only that one stock.

---

Definitions:

Fur Trade

The buying and selling of animal fur as a commercial enterprise, historically a major driver of exploration and settlement in North American regions.

Cod Fisheries

The industry or practice of catching codfish, historically significant for economic development in various regions.

Innis

Harold Innis was a Canadian economist and communication theorist known for his work on media, communication theories, and economic history.

Karl Marx

A nineteenth-century philosopher, economist, and revolutionary who co-developed Marxism, a theoretical framework for analyzing and critiquing capitalism and advocating for socialism.