If an Investor Does Not Diversify Their Portfolio and Instead

question 21

Multiple Choice

If an investor does not diversify their portfolio and instead puts all of their money in one share, the appropriate measure of security risk for that investor is the ________.

• A)share's standard deviation
• B)variance of the market
• C)share's beta
• D)covariance with the market index

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Definitions:

Professional Services

Services provided by individuals with professional qualifications or expertise, such as legal advice, medical treatments, or accounting services.

Clients

Individuals, businesses, or entities that engage the professional services of another, such as lawyers, consultants, or financial advisors, based on a mutual agreement.

Third Parties

Individuals or entities who are not directly involved in a legal contract or agreement but may be affected by its outcomes.

Ernst & Ernst v. Hochfelder

A 1976 Supreme Court case establishing that plaintiffs in securities fraud cases must prove that the defendant acted with scienter, or intent to deceive, manipulate, or defraud.