Exhibit 7-5 -Given Exhibit 7-5,what Is the Weight of Security 2

question 16

Multiple Choice

Exhibit 7-5

-Given Exhibit 7-5,what is the weight of Security 2?

• A) 42.9%
• B) 33.3%
• C) 23.8%
• D) Cannot be determined with the data given

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Definitions:

Firm-Specific Risk

Risk that affects only a single company

Market Risk

The possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets.

Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio to minimize the impact of any single asset's performance on the overall portfolio returns.

Rule Of 70

A quick formula used to estimate the number of years required for an investment or population to double, calculated by dividing 70 by the annual growth rate.