Which of the Following Situations Would Not Be Predicted by Equity

question 16

Multiple Choice

Which of the following situations would not be predicted by equity theory?

• A)Clara feels she is doing more than her roommate Maeve is to conserve electricty, so Clara pressures Maeve to do more.
• B)Clara feels she is doing more than her roommate Maeve is to conserve electricty, so Clara stops trying so hard.
• C)Clara feels she is doing more than her roommate Maeve is to conserve electricty, but she convinces herself it is because she has more ideas than Maeve does about where to cut back.
• D)Clara feels she is doing more than her roommate Maeve is to conserve electricty, and she figures, ""so what? No big deal.""

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Definitions:

Systematic Risk

A hazard inherent to the entire market or a market segment, which diversification cannot diminish.

Unsystematic Risk

Refers to the risk that is specific to a company or industry, and can be mitigated through diversification.

Portfolio Beta

A measure of the sensitivity of a portfolio's returns to the returns of the overall market, indicating the level of market risk associated with the portfolio.

Portfolio Standard Deviation

A measure of the dispersion of returns from a portfolio, indicating the risk involved in holding the portfolio.