Which of the Following Statements Is CORRECT

question 122

Multiple Choice

Which of the following statements is CORRECT?

• A) Portfolio diversification reduces the variability of returns on an individual stock.
• B) Risk refers to the chance that some unfavorable event will occur, and a probability distribution is completely described by a listing of the likelihood of unfavorable events.
• C) 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.
• D) A stock with a beta of −1.0 has zero market risk if held in a 1-stock portfolio.
• E) When diversifiable risk has been diversified away, the inherent risk that remains is market risk, which is constant for all stocks in the market.

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Definitions:

Music Room

A dedicated space designed for the practice, composition, and enjoyment of music, often equipped with musical instruments and sound-proofing.

Lien

A legal right or claim against a property by a creditor, securing the payment of a debt or the performance of some obligation.

Secured Interest

An interest in personal property or fixtures that secures payment or performance to a creditor.

Consensual

Involving or based on mutual agreement or consent between the parties involved.