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:

Cooperation

The process of groups or individuals working together towards a common goal, often leading to mutual benefit.

Self-Interest

The motivation driving individuals to pursue their own welfare, often guiding economic decisions and behaviors.

Dominant Strategy

A strategy that is best for a player in a game regardless of the strategies chosen by the other players.

Sherman Antitrust Act

A landmark 1890 U.S. legislation aimed at prohibiting monopolies and other practices that restrained competition and trade.