Kurt Decided to Increase the Number of Stocks in His

question 105

Multiple Choice

Kurt decided to increase the number of stocks in his portfolio.In doing so,Kurt reduced

• A)both the firm-specific risk and the market risk of his portfolio.
• B)the firm-specific risk,but not the market risk of his portfolio.
• C)the market risk,but not the firm-specific risk of his portfolio.
• D)neither the market risk nor the firm-specific risk of his portfolio.

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Definitions:

Nominal Rate

The rate of interest before adjustments for inflation or other factors that affect the true cost of borrowing or the real yield on an investment.

Effective Rate

The actual interest rate on an investment or loan, taking into account the effect of compounding over a given period of time.

Effective Annual Rate

It is the interest rate that is adjusted for compounding over a given period. Essentially, it represents the actual annual return on an investment or the actual cost of borrowing.

Per Month

A recurring period or frequency, indicating that an action or event occurs or is calculated on a monthly basis.