Which of the Following Statements Is FALSE

question 59

Multiple Choice

Which of the following statements is FALSE?

• A)Fluctuations of a share'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)The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk.
• D)When we combine many shares in a large portfolio, the firm-specific risks for each share will average out and be diversified.

---

Definitions:

Public Sector

The part of the economy composed of government services and institutions, funded and operated by the government.

Domestic Output

Domestic output, also known as gross domestic product (GDP), is the total value of all goods and services produced within a country's borders in a specific time period.

Federal Government Revenue

The income the federal government receives from taxes, fees, and earnings from its investments, used to fund public services and obligations.

Corporate Income Taxes

Taxes imposed on the income of corporations, which are calculated based on the profits these firms generate.