Which of the flowing 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 supply and demand.

Question

Quizplus · Accepted Answer

This statement is true as a higher percentage of stock in a portfolio increases the overall risk due to market fluctuations but also has potential for higher returns in the long run.

Answer: A
 This statement is generally true as risk-averse people tend to avoid investments with higher risks, such as holding stocks.

Answer: B and D
 Both statements are incorrect. Diversification can reduce firm-specific risk by spreading investments across different industries or sectors. Stock prices are determined by both fundamental analysis and supply and demand factors such as market sentiment and investor behavior.

Which of the Flowing Is Correct