Non-Diversifiable Risk

question 87

Multiple Choice

Non-diversifiable risk:

• A)can be cut almost in half by investing in 10 stocks provided each stock is in a different industry.
• B)can almost be eliminated by investing in 35 diverse securities.
• C)remains constant regardless of the number of securities held in a portfolio.
• D)has little, if any, impact on the actual realized returns for a diversified portfolio.
• E)should be ignored by investors.

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Definitions:

Compensation

involves payment or remuneration provided to an individual or entity for loss, injury, or suffering, aiming to restore financial or emotional equilibrium.

Blue Sky Laws

State laws in the United States designed to protect investors from fraud by requiring sellers of new issues of securities to register their offerings and provide financial details.

Securities

Financial instruments that represent either ownership (e.g., stocks) or a debt agreement (e.g., bonds) between the buyer and the issuer.

Preferred Shares

A class of ownership in a corporation that has a higher claim on its assets and earnings than common shares, usually with fixed dividends.