Which of the Following Statements Is Correct

question 79

Multiple Choice

Which of the following statements is correct?

• A) Risk refers to the chance that some unfavorable event will occur,and a probability distribution is completely described by a listing of the likelihood of unfavorable events.
• B) Portfolio diversification reduces the variability of returns on an individual stock.
• C) When company specific risk has been diversified,the inherent risk that remains is market risk which is constant for all securities in the market.
• D) A stock with a beta of −1.0 has zero systematic (or market)risk.
• E) The SML relates required returns to firms' systematic (or market)risk.The slope and intercept of this line cannot be controlled by the financial manager.

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Definitions:

Lots of Friends

Having a wide circle of acquaintances or companions with whom one shares a bond of mutual affection.

Preschoolers

Children who are in the age group typically ranging from 3 to 5 years old, just before they enter formal schooling.

Blended Families

Family units formed by the merging of two previously separate families into one, often involving parents with children from previous relationships.

Challenges

Difficulties or obstacles that require a solution or response, often serving as opportunities for growth or learning.