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:

Recruiters

Professionals who seek out, interview, and screen applicants to fill job vacancies within an organization.

Attractiveness

The quality of being appealing to the senses, mind, or feelings, often used in the context of personal or product appeal.

Recruitment Function

The process and activities related to identifying, attracting, evaluating, and hiring individuals to fill job vacancies within an organization.