Which of the Following Statements Is CORRECT

question 54

Multiple Choice

Which of the following statements is CORRECT?

• A) 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.
• B) 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.
• C) 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.
• D) Portfolio diversification reduces the variability of returns (as measured by the standard deviation)of each individual stock held in a portfolio.
• E) A security's beta measures its non-diversifiable,or market,risk relative to that of an average stock.

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Definitions:

Job F

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Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production, based on a selected activity base.

Direct Labor-hour

The number of labor hours spent on the direct production of goods or services.

Manufacturing Overhead

Costs incurred from the manufacturing process, which exclude both direct labor and materials, are categorized as indirect costs.