As the Number of Stocks in a Portfolio Rises

question 71

Multiple Choice

As the number of stocks in a portfolio rises,

• A)both firm-specific risks and market risk fall.
• B)firm-specific risks fall;market risk does not.
• C)market risk falls;firm-specific risks do not.
• D)neither firm-specific risks nor market risk falls.

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Definitions:

Bond Premium

The amount by which the market price of a bond exceeds its par value, typically arising when the bond's interest rate is higher than the market rate.

Forward Contract

A customized financial agreement to buy or sell an asset at a specified future date at a price agreed upon today.

Future Date

A specified day in the future, often used in the context of agreements or financial transactions that will occur at a later time.

Amortized Historical Cost

The accounting method of gradually writing off the initial cost of an asset over a period, adjusting for depreciation or amortization.