By Diversifying,the Risk of Holding Stock

question 42

Multiple Choice

By diversifying,the risk of holding stock

• A)can be eliminated.On average over the past two centuries stocks paid a higher average real return than bonds.
• B)can be eliminated.On average over the past two centuries stocks paid a lower average real return than bonds.
• C)can be reduced but not eliminated.On average over the past two centuries stocks paid a higher average real return than bonds.
• D)can be reduced but not eliminated.On average over the past two centuries stocks paid a lower average real return than bonds.

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Definitions:

Deduct

To subtract or take away from the gross amount; in taxation, to lower taxable income by subtracting allowable deductions.

At-risk Amount

The investment in money or other property at risk in an activity, determining the deductible loss limit.

Passive Loss Rules

Tax provisions limiting the amount of loss investors can claim from passive activities, such as rental properties, to offset other income.

Income

Funds acquired regularly from labor or investment returns.