Which of the Following Is Correct

question 64

Multiple Choice

Which of the following is correct?

• A)Risk-averse people will not hold stock.
• B)Diversification cannot reduce firm-specific risk.
• C)The larger the percentage of stock in a portfolio,the greater the risk,but the greater the average return.
• D)Stock prices are determined by fundamental analysis rather than by supply and demand.

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Definitions:

Risk-free

An investment category that promises return payments with zero default risk, often exemplified by treasury bonds of stable governments.

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase an asset at a specified price within a specific time period.

Put

A put is an options contract giving the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price before the contract expires.

Option

A financial contract granting the buyer the right, but not the obligation, to buy or sell an asset at a set price within a specific time.