Diversification Cannot Eliminate Idiosyncratic Risk, Which Is the Uncertainty Associated

question 37

True/False

Diversification cannot eliminate idiosyncratic risk, which is the uncertainty associated with the specific companies.

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Definitions:

Stock Dividend

A distribution of extra shares to shareholders instead of a financial dividend.

Cash Dividend

A portion of a company's earnings distributed to shareholders in cash.

Credit Balance

A situation in an account where the sum of credits exceeds the sum of debits, indicating the company owes money.

Retained Earnings

The portion of a company's profit that is held or retained and saved for future use, reinvestment, or debt repayment instead of being paid out as dividends to shareholders.