Which of the Following Statements Best Describes Risk

question 30

Multiple Choice

Which of the following statements best describes risk?

• A) An investor can eliminate virtually all market risk if he or she holds a very large and well- diversified portfolio of stocks.
• B) The higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio.
• C) It is impossible to have a situation where the market risk of a single stock is less than that of a portfolio that includes the stock.
• D) An investor can eliminate virtually all diversifiable risk if he or she holds a very large, well-diversified portfolio of stocks.

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Definitions:

Mutual Benefit Bailment

An arrangement where both the bailor and bailee receive a benefit from the bailed property, typically involving the use or possession of goods.

Liability

The legal responsibility of an individual for his or her actions.

Fur Coat

A coat made from the fur of animals, worn for warmth or as a fashion statement.

Bailment

The act of temporarily transferring physical possession of personal property by one party (the bailor) to another (the bailee) for a specific purpose.