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

question 121

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:

Conditioned Reinforcer

A stimulus that has acquired the capacity to strengthen desirable behavior through its association with a primary reinforcer.

Discriminative Stimulus

A specific stimulus in the presence of which a particular response is more likely to be reinforced, and in the absence of which a response is not likely to be reinforced.

Primary Reinforcer

An innately satisfying stimulus, such as food or warmth, that does not require learning to become desirable and motivates behavior.

Conditioned Reinforcer

A stimulus or event that gains its reinforcing power through its association with a primary reinforcer.