Use the Information for the Question(s)below

question 72

Essay

Use the information for the question(s)below.
Consider an economy with two types of firms, S and U. The S firms always move together, but U firms move independently of each other. For both types of firms there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return.
-Is it accurate to state that as we add more shares of different firms to a portfolio, its risk is eliminated to zero?
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Definitions:

Personal Property Security Act

Legislation that provides rules for secured transactions involving personal property, ensuring interests are protected and prioritized.

Chattel Security

A type of security interest granting a lender the right to repossess personal property used as collateral if the borrower defaults.

Consumer Goods

Products and services that are purchased for personal or household use.

Collateral

Goods or property used to secure a debt.