Which One of the Following Statements Is True

question 30

Multiple Choice

Which one of the following statements is true?

• A)A well-diversified portfolio has negligible systematic risk.
• B)A well-diversified portfolio has negligible unsystematic risk.
• C)An individual security has negligible systematic risk.
• D)An individual security has negligible unsystematic risk.
• E)Both a well-diversified portfolio and an individual security have negligible unsystematic risk.

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Definitions:

Type I Error

The incorrect rejection of a true null hypothesis, also known as a "false positive".

Effect Size

A quantitative measure of the magnitude of the difference between groups or the strength of the relationship between variables in a statistical analysis.

Null Hypothesis

A statement positing that there is no significant difference or effect, often the initial assumption in hypothesis testing.

Type II Error

The error made when a test fails to reject a false null hypothesis, often denoted by beta (β).