If an Investor Plans to Add a Stock to a Well-Diversified

question 6

Multiple Choice

If an investor plans to add a stock to a well-diversified portfolio,the investor should first consider the ________ risks of that additional stock.

• A)expected total
• B)historical total
• C)systematic
• D)idiosyncratic
• E)firm-specific

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Definitions:

Social Security Tax

A tax that funds the Social Security program, typically collected as part of the FICA tax.

Medicare Tax

A federal tax that finances the Medicare program, split equally between employers and employees, based on a fixed percentage of an individual’s earnings.

Social Security

A government program that provides financial support to people who are retired, disabled, or survivors of deceased workers.

Medicare

A federal health insurance program in the United States for people aged 65 and over, or for those under 65 with certain disabilities or conditions.