Non-Diversifiable Risk

question 28

Multiple Choice

Non-diversifiable risk:

• A) can be cut almost in half by simply investing in 10 stocks provided each stock is in a different industry.
• B) can almost be eliminated by investing in 35 diverse securities.
• C) remains constant regardless of the number of securities held in a portfolio.
• D) has little, if any, impact on the actual realized returns for a diversified portfolio.
• E) should be ignored by investors.

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Definitions:

Spontaneous Recovery

The reemergence of a previously extinguished conditioned response after a period of no exposure to the conditioned stimulus.

Stimulus Discrimination

Stimulus Discrimination is the ability to differentiate between one stimulus and another, especially in the context of learning and behavior.

Spontaneous Recovery

The phenomenon where a learned behavior resurfaces after a period of non-exposure to the associated stimulus, demonstrating the persistence of memory over time.

Pavlov

Refers to Ivan Pavlov, a Russian physiologist known for his work in classical conditioning, particularly using bells to induce salivation in dogs.