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

question 28

Multiple Choice

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

• A) buy only stocks with a beta of 1.0.
• B) build a portfolio with 40 to 55 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:

Pumpkins

A type of squash plant known for its round, orange fruit used primarily for decoration, cooking, and as a symbol of Halloween.

Price Ceilings

A maximum price legally allowed for a product or service to safeguard the interests of consumers.

Pharmaceutical Industry

Refers to the sector of the economy that discovers, develops, produces, and markets drugs or pharmaceutical drugs for use as medications to be administered to patients, with the aim to cure them, vaccinate them, or alleviate symptoms.

Drug Manufacturers

Companies engaged in the production, marketing, and distribution of medications for health conditions.