Use the Following Three Statements to Answer This Question

question 108

Multiple Choice

Use the following three statements to answer this question:
I.There will be benefits from diversification as long as
.
II.As long as
, an equally weighted portfolio would be risk-free.
III.Diversification can never eliminate the total risk of the portfolio.

• A)I is correct, II is incorrect, III is correct.
• B)I is incorrect, II is correct, III is correct.
• C)I and II are correct, III is incorrect.
• D)I, II and II are incorrect.

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Definitions:

Fixed Costs

Regardless of how much is produced or sold, certain costs like rent, employee salaries, and insurance payments do not vary.

Variable Costs

Expenses that change in proportion to the activity of a business.

Selling Price

The price at which a product or service is sold to the customer.

Capital Structure

The composition of a company's funding through debt and equity, and how it impacts its risk and value.