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:

Total Compensation

The complete package of direct financial benefits (like salary, bonuses) and indirect benefits (such as health insurance, pensions) that an employee receives from an employer.

ESOP

Employee Stock Ownership Plan, a program that provides company stock to employees as part of their compensation.

Gain-Sharing Plan

A compensation strategy where employees receive bonuses based on the company's profits or improvements in performance, fostering a sense of ownership and teamwork.

Lump-Sum Increase

A one-time payment given to employees, typically in lieu of recurring pay raises, often based on performance.