Which of the Following Statements Is CORRECT

question 180

Multiple Choice

Which of the following statements is CORRECT?

• A) portfolio diversification reduces the variability of returns on an individual stock.
• B) risk refers to the chance that some unfavorable event will occur, and a probability distribution is completely described by a listing of the likelihoods of unfavorable events.
• C) the sml relates a stock's required return to its market risk. the slope and intercept of this line cannot be controlled by the firms' managers, but managers can influence their firms' positions on the line by such actions as changing the firm's capital structure or the type of assets it employs.
• D) a stock with a beta of σ1.0 has zero market risk if held in a 1-stock portfolio.
• E) when diversifiable risk has been diversified away, the inherent risk that remains is market risk, which is constant for all stocks in the market.

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Definitions:

β-Furanose

A form of a cyclic sugar where the furanose ring has the hydroxyl group at the anomeric carbon in the beta configuration.

α-D-Glucopyranose

An isomer of glucose that is a six-membered oxygen-containing ring (pyranose form), important in biology and nutrition.

Anomers

Carbohydrates that differ in configuration only at the hemiacetal or hemiketal carbon atom, often referred to as the anomeric carbon.

Optical Rotation

The measurement of the degree to which a chiral compound rotates plane-polarized light, a property specific to chiral substances.