Which of the Following Statements Is Correct

question 83

Multiple Choice

Which of the following statements is correct?

• A)When company-specific risk has been diversified away, the inherent risk that remains is market risk, which is constant for all stocks in the market.
• B)Portfolio diversification reduces the variability of returns on an individual stock.
• C)Risk refers to the chance that some unfavourable event will occur, and a probability distribution is completely described by a listing of the likelihoods of unfavourable events.
• D)The SML relates a stock's required return to its market risk. The slope and intercept of this line cannot be controlled by the firms' managers, but managers can influence their firms' positions on the line.

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Definitions:

Defender Strategy

A competitive strategy where a company focuses on protecting its market share through improving product quality, reducing costs, or enhancing service levels.

Strategic Alternative

Different plans or options a company might adopt to achieve its strategic objectives or address key challenges.

Basic Conditions

Basic Conditions refer to the fundamental terms of employment, including work hours, salary, benefits, and working environment, usually outlined in labor laws or contracts.

Unrelated Diversification

A business strategy where a company expands into operations or markets with no relation to its existing operations.