Which of the Following Statements Is Correct

question 28

Multiple Choice

Which of the following statements is correct?

• A) Risk refers to the chance that some unfavorable event will occur, and a probability distribution is completely described by a listing of the likelihood of unfavorable events.
• B) Portfolio diversification reduces the variability of returns on an individual share.
• C) When company specific risk has been diversified, the inherent risk that remains is market risk which is constant for all securities in the market.
• D) A share with a beta of -1.0 has zero systematic (or market) risk.
• E) The SML relates required returns to firms' systematic (or market) risk.The slope and intercept of this line cannot be controlled by the financial manager.

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