Which of the Following Statements Is CORRECT

question 43

Multiple Choice

Which of the following statements is CORRECT?

• A) Portfolio diversification reduces the variability of returns on an individual stock.
• B) Risk refers to the chance that some unfavorable event will occur, and a probability distribution is completely described by a listing of the likelihood of unfavorable events.
• C) The SML relates a stock's required return to its market risk. The slope and intercept of this line cannot be controlled by the firms' managers, but managers can influence their firms' positions on the line by such actions as changing the firm's capital structure or the type of assets it employs.
• D) A stock with a beta of -1.0 has zero market risk if held in a 1-stock portfolio.
• E) When diversifiable risk has been diversified away, the inherent risk that remains is market risk, which is constant for all stocks in the market.

---

Definitions:

Rhytidoplasty

A surgical procedure commonly known as a facelift, aimed at reducing wrinkles and signs of aging on the skin.

Suffix

A morpheme added at the end of a word to form a derivative, changing its meaning or creating a new word.

Leukoplakia

A white patch or plaque that develops on the tongue, the inside of the cheek, or on the floor of the mouth, often associated with smoking or other irritants.

Mucous Membrane

A protective lining found in various parts of the body such as nose, mouth, and lungs, producing mucus.