Figure 27-4 -Which of the Following Is a Source of Market Risk

question 33

Multiple Choice

Figure 27-4
-Which of the following is a source of market risk?

• A)Holding stocks in many companies carries the risk of a reduced average return.
• B)Real GDP varies over time and sales and profits move with real GDP.
• C)When a paper producer has declining sales, it is likely that so will other paper producers.
• D)If stockholders become aggravated with the way a CEO runs a company, the price of that company's stock might fall in the stock market.

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Definitions:

Preferred Stock

Equity securities that provide a fixed dividend and have priority over common stock in the event of a company's liquidation.

Common Stock

A type of security that represents ownership in a corporation, entitling the shareholder to a share of the company's profits and assets.

Capital Stock

The total amount of a company's stock (both preferred and common) authorized for issuance, representing ownership in the company.

Preferred Stock

A class of stock that typically offers dividends and claim on assets before common stockholders but usually does not have voting rights.