One of the Easiest Methods of Diversifying Away Firm-Specific Risks

question 12

Multiple Choice

One of the easiest methods of diversifying away firm-specific risks is to:

• A)buy stocks with a Beta of 1.0.
• B)build a portfolio with 20-25 individual stocks.
• C)purchase the shares of a mutual fund.
• D)purchase stocks that plot above the security market line.

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Definitions:

Tangible Factors

Physical or material aspects that can be observed and measured in a decision-making process.

Intangible Factors

Elements that cannot be seen or touched but still significantly affect outcomes, such as reputation or brand value.

Negotiation

is the process of discussing and coming to mutual agreements between parties with differing interests.

Levels Of Conflict

The classification of conflict based on its intensity and complexity, ranging from internal, interpersonal, to organizational or societal levels.