Which of the Following Statements About Diversification Is Correct

question 59

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 its unsystematic risk.

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Definitions:

Gpresult

A command that displays Group Policy settings. A Group Policy determines how a computer is configured for both system and user (or a group of users) settings.

Xcopy

A command that transfers files from one place to another in the command prompt environment.

Self-replicating

The ability of an entity, especially viruses or certain programs, to produce copies of itself autonomously.

Worm

A virus program that replicates from one drive to another. The most common worm virus today is an email message that, when opened, sends the virus to every address in the user’s address book.