If You Have a Portfolio of Two Risky Stocks Which

question 26

Multiple Choice

If you have a portfolio of two risky stocks which turns out to have no diversification. The reason you have no diversification is:

• A) the returns are too small.
• B) the returns move perfectly opposite of one another.
• C) the returns are too large to offset.
• D) the returns move perfectly with one another.
• E) the returns are completely unrelated to one another.

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Definitions:

Liability

A financial obligation or debt that a company owes, which will need to be paid to creditors, suppliers, or other parties.

Consolidated Balance Sheet

A financial statement that presents the assets, liabilities, and shareholders' equity of a parent company and its subsidiaries as one entity.

Net Assets

The total assets of a company or organization minus its total liabilities, reflecting the entity's own equity value.

Acquisition

The process by which one company takes over controlling interest or assets of another company.