Use the Information for the Question(s)below

question 63

Multiple Choice

Use the information for the question(s) below.
Big Cure and Little Cure are both pharmaceutical companies.Big Cure presently has a potential "blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval.If approved,Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure.Little Cure has 10 separate less important drugs before the FDA waiting for approval.If approved,each of Little Cure's drugs would produce $100 million in net income for Little Cure.The probability of the FDA approving a drug is 50%.
-Which of the following statements is FALSE?

• A)Fluctuations of a stock's returns that are due to firm-specific news are common risks.
• B)The volatility in a large portfolio will decline until only the systematic risk remains.
• C)When we combine many stocks in a large portfolio,the firm-specific risks for each stock will average out and be diversified.
• D)The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk.

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Definitions:

Scope Creep

An ever-changing set of requests from clients for additional features as they wait longer and longer to see a working prototype.

Photosynthesis

The process by which green plants and some other organisms use sunlight to synthesize nutrients from carbon dioxide and water.

Sunlight Radiation

The spectrum of electromagnetic radiation emitted by the sun, including visible light, ultraviolet light, and infrared radiation, which is essential for life on Earth.

Visible Light

The portion of the electromagnetic spectrum that is visible to the human eye and is responsible for the sense of sight.