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:

Exponential Form

A mathematical expression where a number is written as the base raised to a specific power or exponent, representing repeated multiplication.

Exponential Form

A way of representing numbers, typically involving expressions using powers of a base number, especially in the context of exponential growth or decay.

Simplest Form

The form of a mathematical expression or fraction when it has been simplified to its most basic components, with no common factors in the numerator and denominator for fractions.

Add Fractions

The process of combining two or more fractions to find their total, involving finding a common denominator.