Which of the Following Statements Is FALSE

question 84

Multiple Choice

Which of the following statements is FALSE?

• A) The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk.
• B) When we combine many stocks in a large portfolio, the firm-specific risks for each stock will average out and be diversified.
• C) Fluctuations of a stock's return that are due to firm-specific news are common risks.
• D) The volatility in a large portfolio will decline until only the systematic risk remains.

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Definitions:

Insurance Policy

A contract between an insurer and a policyholder that specifies the terms and conditions under which the insurer will compensate the policyholder for loss.

Adjusting Entries

At the close of an accounting period, journal entries are made to apportion income and spending to the timeframe in which they legitimately took place.

Prepaid Insurance

Payments made in advance for insurance coverage, recorded as an asset on the balance sheet until the coverage period elapses.

Adjusting Entries

Entries in accounting made at the period's end to assign earnings and costs to their respective actual periods.