The Amount of Risk That Is Eliminated in a Portfolio

question 86

Multiple Choice

The amount of risk that is eliminated in a portfolio depends on the degree to which the stocks face ________ risks and their prices move together.

• A) common
• B) independent
• C) firm-specific
• D) unique

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Definitions:

Firm Commitment

An underwriter's guarantee to the issuer to sell an entire offering of stocks or bonds at a set price.

Offering Prospectus

A legal document issued by companies that are offering securities for sale, detailing the company's financial health and investment risks.

Issuing Corporation

A company that raises capital through the sale of securities, such as shares or bonds, to investors.