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:

PERT Activity

A task or event within the Program Evaluation and Review Technique, a project management tool used to schedule, organize, and coordinate tasks within a project.

Critical Path

The sequence of stages determining the minimum time needed to complete a project, where any delay in the stages causes a delay in the project.

Organizational Responses

The actions or reactions of an organization to internal or external stimuli such as changes in the market, new regulations, or employee feedback.

Narrow Product Lines

Refers to a business strategy focusing on a limited selection of products or services, allowing for specialization and potentially higher proficiency or quality.