Diversification Eliminates Unsystematic Risk but Does Not Eliminate Systematic or Overall

question 67

True/False

Diversification eliminates unsystematic risk but does not eliminate systematic or overall market risk.

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Definitions:

Carrying Amount

The value of an asset or liability as reported on the balance sheet, reflecting its original cost minus any depreciation, amortization, or impairment charges.

Pre-Acquisition Equity

The equity interest in a company existing prior to its acquisition by another entity, used to determine the acquisition date fair value of the investee.

Dividend Declared

The official announcement by a company's board of directors that a dividend will be paid to shareholders, specifying the amount and payment date.

Goodwill

The intangible asset that arises when a business is acquired for more than the fair value of its net identifiable assets, reflecting factors like reputation, brand, and customer relationships.