If You Build a Large Enough Portfolio, You Can Diversify

question 78

Multiple Choice

If you build a large enough portfolio, you can diversify away all ________ risk, but you will be left with ________ risk.

• A)diversifiable, diversifiable
• B)diversifiable, unsystematic
• C)unsystematic, systematic
• D)systematic, undiversifiable

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Definitions:

Equity Method

An accounting technique used to record investments in other companies by recognizing income and changes in investment value.

Voting Shares

Stocks that allow the holder to participate in voting on corporate issues, including the election of board members.

Second Purchase

The act of buying something for the second time, often used in customer behavior analysis.

Voting Shares

Shares that grant the shareholder the right to vote on matters of corporate policy and the election of the board of directors.