Which of the Following Statements Is CORRECT

question 246

Multiple Choice

Which of the following statements is CORRECT?

• A)Portfolio diversification reduces the variability of returns on an individual stock.
• B)Risk refers to the chance that some unfavorable event will occur, and a probability distribution is completely described by a listing of the likelihoods of unfavorable events.
• C)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 by such actions as changing the firm's capital structure or the type of assets it employs.
• D)A stock with a beta of −1.0 has zero market risk if held in a 1-stock portfolio.
• E)When diversifiable risk has been diversified away, the inherent risk that remains is market risk, which is constant for all stocks in the market.

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Definitions:

Cost of Goods Purchased

The total cost incurred for goods bought for resale or used in production during a specific period, excluding labor and overhead expenses.

Net Purchases

Total purchases minus returns, allowances, and discounts.

Freight-In

Freight-in refers to the shipping cost associated with getting raw materials or inventory to a company, which is added to the cost of goods.

Cost of Goods Sold

The expenses directly related to the manufacturing of products a company sells, which includes the cost of materials and labor.