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.

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Definitions:

Price Rationing

The process of distributing goods and services among consumers by setting a price level that balances demand with supply.

Allocated

Distributed or assigned resources, time, or funds to specific projects, tasks, or purposes.

Price Floor

A government- or authority-imposed minimum price for a commodity, which is meant to ensure that the market price does not drop below a certain level.

Equilibrium Price

The price at which the quantity of a good or service supplied equals the quantity demanded, leading to market stability where there is no tendency for change.