Use the Information for the Question(s)below

question 63

Multiple Choice

Use the information for the question(s) below.
Big Cure and Little Cure are both pharmaceutical companies.Big Cure presently has a potential "blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval.If approved,Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure.Little Cure has 10 separate less important drugs before the FDA waiting for approval.If approved,each of Little Cure's drugs would produce $100 million in net income for Little Cure.The probability of the FDA approving a drug is 50%.
-Which of the following statements is FALSE?

• A)Fluctuations of a stock's returns that are due to firm-specific news are common risks.
• B)The volatility in a large portfolio will decline until only the systematic risk remains.
• C)When we combine many stocks in a large portfolio,the firm-specific risks for each stock will average out and be diversified.
• D)The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk.

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Definitions:

Strawberry

A sweet, red, heart-shaped fruit known for its juicy texture and distinctive aroma, belonging to the genus Fragaria.

Vanilla

Often used to describe something that is standard, basic, or without any special features or enhancements, especially in the context of food, sexual preferences, or software.

Fish

Aquatic, gilled vertebrates typically covered with scales and equipped with two sets of paired fins and several unpaired fins.

Intermodal Perception

The developmental ability to integrate and coordinate information from two or more sensory modalities, such as sight and sound.