Which of the Following Statements Is False

question 73

Multiple Choice

Which of the following statements is false?

• A) Firm-specific news is good or bad news about the company itself.
• B) Firms are affected by both systematic and firm-specific risk.
• C) When firms carry both types of risk, only the firm-specific risk will be diversified when we combine many firms' stocks into a portfolio.
• D) The risk premium for a stock is affected by its idiosyncratic risk.

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Definitions:

Free Throw

A shot in basketball granted to a player after a foul, taken from the free-throw line without opposition.

Fair Coin

A theoretical or ideal coin for which the probability of landing heads or tails is exactly equal, used in probability theory.

Probability

Probability is a measure of the likelihood that an event will occur, expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Random Phenomenon

An event or a process that cannot be predicted with certainty due to the random nature of its outcomes.