Which of the Following Statements Is Correct

question 79

Multiple Choice

Which of the following statements is correct?

• A) Risk refers to the chance that some unfavorable event will occur,and a probability distribution is completely described by a listing of the likelihood of unfavorable events.
• B) Portfolio diversification reduces the variability of returns on an individual stock.
• C) When company specific risk has been diversified,the inherent risk that remains is market risk which is constant for all securities in the market.
• D) A stock with a beta of −1.0 has zero systematic (or market)risk.
• E) The SML relates required returns to firms' systematic (or market)risk.The slope and intercept of this line cannot be controlled by the financial manager.

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Definitions:

Statistic

A single measure, calculated from a sample, used to estimate the value of a population parameter.

Population

The entire group of individuals or instances about whom the study is concerned or from which a statistical sample is drawn for analysis.

Sample

A subset of a population used in statistical analysis to estimate characteristics or outcomes of the entire population.

Descriptive Measure

Statistical calculations that summarize or describe characteristics of a data set, including measures like mean, median, mode, and range.