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.

---

Definitions:

Legislative Earmarks

Provisions within legislation that direct approved funds to be spent on specific projects or for the benefit of a particular congressional district or politician.

Lobbying Reforms

Changes or improvements to the rules and regulations governing how individuals or groups can influence legislation and policymakers.

Lobbying Disclosure Act

A 1995 law requiring federal lobbyists to register with Congress and to disclose their clients, income, and expenditures regularly.

Lobbyist Register

An official record or list of individuals or organizations that engage in lobbying efforts, typically to influence political decisions or policy on behalf of specific interests.