1-20 the Ability of Diversification to Eliminate Much of the Risk

question 76

True/False

1-20 The ability of diversification to eliminate much of the risk from the asset side of the balance sheet of an FI is the result of choosing assets that are less than perfectly positively correlated.

---

Definitions:

Treasury Stock

Treasury stock is made up of shares that have been issued and subsequently bought back by the company that issued them, which decreases the number of shares available on the open market.

Common Stock

A type of equity security that represents ownership in a corporation, providing voting rights and a share in the company's profits through dividends.

Par Preferred Stock

Preferred shares issued at a stated value (par value), which typically determines the dividend payments and is considered during liquidation.

Journalize

The process of recording transactions in a journal, which includes detailing the financial transactions of a company in chronological order.