Diversification Can Effectively Reduce Risk

question 47

Multiple Choice

Diversification can effectively reduce risk.Once a portfolio is diversified, the type of risk remaining is:

• A)individual security risk.
• B)riskless security risk.
• C)risk related to the market portfolio.
• D)total standard deviations.
• E)None of the above.

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Definitions:

Critical Value

A threshold in hypothesis testing, which when exceeded or not met determines the outcome of the test, often leading to the rejection or acceptance of the null hypothesis.

Test Statistic

A calculated value from sample data used to assess the plausibility of a hypothesis in statistical hypothesis testing.

Obtained Value

The actual value or result achieved in a statistical analysis or experiment, often compared against a theoretical or expected value.

Comparison Value

A benchmark or point of reference against which other values or outcomes are compared or assessed.