Which of the Following Statements Is Correct

question 36

Multiple Choice

Which of the following statements is correct?

• A) Portfolio diversification reduces the variability of the returns on the individual stocks held in the portfolio.
• B) If an investor buys enough stocks,he or she can,through diversification,eliminate virtually all of the nonmarket (or company-specific)risk inherent in owning stocks.Indeed,if the portfolio contained all publicly traded stocks,it would be riskless.
• C) The required return on a firm's common stock is determined by its systematic (or market)risk.If the systematic risk is known,and if that risk is expected to remain constant,then no other information is required to specify the firm's required return.
• D) A security's beta measures its nondiversifiable (systematic,or market)risk relative to that of an average stock.
• E) A stock's beta is less relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only that one stock.

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Definitions:

Newly Infected

Refers to individuals who have recently been diagnosed with a contagious disease or infection.

Conformity

The act of matching attitudes, beliefs, and behaviors to group norms, politics, or being influenced by peer pressure.

Bystander Intervention

The act of stepping in to help someone who is in a difficult or dangerous situation when others present do not act.

Social Influence

The effect that the words, actions, or mere presence of other people have on our thoughts, feelings, attitudes, or behavior.