Which of the Following Statements About Diversification Is Correct

question 46

Multiple Choice

Which of the following statements about diversification is correct?

• A) Portfolio diversification reduces the variability of returns on an individual stock.
• B) When the company specific risk has been diversified, the inherent risk that remains is the market risk, which is constant for all securities in the market.
• C) A stock with a beta of −1.0 has maximum nondiversifiable risk.
• D) When two perfectly positively correlated stocks with the same risk are combined, the portfolio risk is equal to the risk associated with the individual stocks.
• E) The systematic risk of a stock with a beta of zero is equal to the market risk.

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Definitions:

Response

A response to a certain trigger or scenario that may manifest physically, emotionally, or in actions.

Organism

A living entity that can function independently, such as an animal, plant, or microorganism.

Positive Reinforcers

Stimuli that, when introduced after a response, increase the probability of that response occurring in the future.

Heel

The posterior part of the foot below the ankle or the back end of a shoe or sock designed to support the heel of the foot.