Which of the Following Statements Is NOT True About One-Factor

question 42

Multiple Choice

Which of the following statements is NOT true about one-factor models and diversification?

• A) it leads to an averaging of factor risk
• B) for a well-diversified portfolio, factor risk will be insignificant
• C) it can substantially reduce nonfactor risk
• D) for a well-diversified portfolio, nonfactor risk will be insignificant

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Definitions:

Wage Rate

The amount of compensation paid to an employee by an employer in exchange for work performed, typically expressed per hour or year.

Total Demand

The complete quantity of a good or service that consumers are willing and able to purchase at a certain price level across the market.

Nonunionized

Workplaces or workers that are not part of a labor union or trade union.

Equilibrium Wage

The pay rate where the amount of labor available matches the amount of work needed.