As Diversification Increases, the Firm-Specific Risk of a Portfolio Approaches

question 51

Multiple Choice

As diversification increases, the firm-specific risk of a portfolio approaches

• A) 0.
• B) 1.
• C) infinity.
• D) (n − 1) × n.

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Definitions:

Production Rate

The speed at which goods are manufactured or produced within a given time period.

Average Inventory

The mean value of inventory held over a certain period of time, indicating the level of stock being maintained.

Single-Period Model

is a decision-making tool used in inventory management, assuming demand is uncertain and there is only one opportunity to order stock for a particular period.

EOQ

Economic Order Quantity; a formula used in inventory management to determine the ideal order size that minimizes total inventory holding costs and ordering costs.