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

question 81

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 an index fund.
• D) purchase stocks that plot above the security market line.

---

Definitions:

Pancreatic Juice

A liquid secreted by the pancreas that contains a variety of enzymes critical for the digestion of food in the small intestine.

Goblet Cells

Epithelial cells that secrete mucus to protect and lubricate many internal body surfaces.

Produce Mucus

The process by which mucous membranes secrete mucus, a thick protective fluid.

Mucus

A thick, slippery substance produced by the mucous membranes and glands, used to lubricate and protect certain parts of the body like the respiratory tract.