Which of the Following Statements Is FALSE

question 84

Multiple Choice

Which of the following statements is FALSE?

• A) The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk.
• B) When we combine many stocks in a large portfolio, the firm-specific risks for each stock will average out and be diversified.
• C) Fluctuations of a stock's return that are due to firm-specific news are common risks.
• D) The volatility in a large portfolio will decline until only the systematic risk remains.

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Definitions:

Elaboration Likelihood Model

A theory in social psychology that explains how attitudes are formed and changed through two routes of persuasion: central and peripheral.

Persuasion

The act of convincing someone to believe or do something through reasoning or argument.

Individual's Motivation

The internal and external factors that stimulate desire and energy in people to be continually interested and committed to a job, role, or subject.

Ability

The capacity or skill to do something effectively, such as solving problems, performing tasks, or adapting to situations.