If an Investor Does Not Diversify His Portfolio and Instead

question 58

Multiple Choice

If an investor does not diversify his portfolio and instead puts all of his money in one stock, the appropriate measure of security risk for that investor is the ________.

• A) stock's standard deviation
• B) variance of the market
• C) stock's beta
• D) covariance with the market index

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Definitions:

Direct Cross-Subsidies

A financial practice where the revenue from one product or service directly supports another within the same company, often to maintain competitive pricing or support strategic objectives.

Above Market Rates

Compensation or prices that exceed the average or expected standard within a specific industry or market.

Free Meal

A meal provided without charge, often as a form of aid, hospitality, or marketing strategy.

Key Driver

A critical factor or element that significantly influences the outcome or success of a process, strategy, or business.