If an Investor Does Not Diversify Their Portfolio and Instead

question 32

Multiple Choice

If an investor does not diversify their portfolio and instead puts all of their money in one stock,the appropriate measure of security risk for that investor is the ________.

• A) stock's standard deviation
• B) variance of the market
• C) stock's beta
• D) covariance with the market index

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Definitions:

Order of Presentation

the sequence in which financial information is organized and presented in financial statements, typically following accounting standards or regulations.

Cash Equivalents

Short-term, highly liquid investments that are easily convertible to a known amount of cash and are subject to insignificant risk of changes in value.

Cheques Outstanding

Cheques that have been written and recorded in the payer's accounting system but have not yet been cashed or cleared by the receiving bank.

Prepaid Expenses

Payments made for goods or services to be received in the future, treated as assets on a balance sheet until used.