Jeff Goldblum Has Just Purchased a Security Which Has No

question 50

Multiple Choice

Jeff Goldblum has just purchased a security which has no maturity date and no promised payments. He can recoup his investment by either selling the security to another individual or to the issuer, if the issuer ever makes an offer to buy it. What type of security did Jeff purchase?

• A) Stock option
• B) Corporate bond
• C) Government bond
• D) Preferred stock
• E) Common stock

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Definitions:

Unique Risk

Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also called firm-specific risk, nonsystematic risk, or diversifiable risk.

Diversification

Diversification is an investment strategy that aims to reduce risk by allocating investments among various financial instruments, industries, geographic locations, or other categories.

Portfolio

A collection of investments, such as stocks, bonds, commodities, and real estate, held by an individual or an institution.

Index Model

A statistical model to estimate the returns of a stock based on the returns of a broader market index.