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:

Resonance Structures

Representations of a molecule showing different electron distributions, but the actual molecule is a hybrid of these.

Major Contributor

The most significant structure or mechanism among several possibilities in a chemical reaction or process.

Resonance Hybrid

A representation of a molecule where the electron distribution is a hybrid of two or more structures, illustrating the delocalization of electrons.

Resonance Forms

Alternative ways of drawing the structure of a molecule to show the delocalization of electrons within the molecule.