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:

Cline

A gradual change in certain characteristics exhibited by members of a species over a geographical area.

Hormone-disrupting Chemicals

Substances that interfere with the normal functioning of the endocrine system, potentially causing developmental, reproductive, neurological, and immune problems.

Human Health

Overall state of physical, mental, and social well-being for individuals or populations, not merely the absence of disease.

Racism

A doctrine of superiority by which one group justifies the degrading of others based on their distinctive physical characteristics.