Which of the Following Statements Is Correct

question 83

Multiple Choice

Which of the following statements is correct?

• A)When company-specific risk has been diversified away, the inherent risk that remains is market risk, which is constant for all stocks in the market.
• B)Portfolio diversification reduces the variability of returns on an individual stock.
• C)Risk refers to the chance that some unfavourable event will occur, and a probability distribution is completely described by a listing of the likelihoods of unfavourable events.
• D)The SML relates a stock's required return to its market risk. The slope and intercept of this line cannot be controlled by the firms' managers, but managers can influence their firms' positions on the line.

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