Which of the Following Statements Is CORRECT

question 3

Multiple Choice

Which of the following statements is CORRECT?

• A) A large portfolio of randomly selected stocks will always have a standard deviation of returns that is less than the standard deviation of a portfolio with fewer stocks,regardless of how the stocks in the smaller portfolio are selected.
• B) Diversifiable risk can be reduced by forming a large portfolio,but normally even highly-diversified portfolios are subject to market (or systematic)risk.
• C) A large portfolio of randomly selected stocks will have a standard deviation of returns that is greater than the standard deviation of a 1-stock portfolio if that one stock has a beta less than 1.0.
• D) A large portfolio of stocks whose betas are greater than 1.0 will have less market risk than a single stock with a beta = 0.8.
• E) If you add enough randomly selected stocks to a portfolio,you can completely eliminate all of the market risk from the portfolio.

Analyze and calculate asset depreciation using various methods such as straight-line, double-declining balance, and units-of-production.

Recognize the impact of not recording amortization or depreciation expenses on financial statements.

Understand the differentiation between capital and revenue expenditures and the impact on asset valuation.

Identify and account for impairment losses on assets and their effect on financial statements.

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Definitions:

Supreme Court of Canada

The highest court in Canada, which serves as the final arbiter of legal disputes, interpreting the constitution, and assessing federal or provincial law issues.

Securities Administrators

Officials or agencies responsible for enforcing the laws and regulations that govern the securities industry.

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Individuals at the highest level of organizational management who are responsible for making major corporate decisions.

Terminal Cancer

A stage of cancer that is advanced and incurable, leading to the eventual death of the patient.