Question

The S&P 500 Index is one of the most commonly used benchmark indices for the US equity markets. Consisting of 500 companies, it is a market value weighted index. This means that each company's performance is reflected in the index, weighted by the ratio of the company's value to the total value of all the companies.
Description Terms
This type of risk relates to changes in the interest rate Pick one : systematic risk
This can be used to reduce the stand-alone risk of an investment by combining it with other investments in a portfolio Diversification or correlation coefficient
This type of risk is inherent in a firm's operations systematic risk or unsystematic risk
A listing of each possible outcome and the probability of each outcome occurring Probability distribution or risk premium
You invest 100,000 in only one stock. What kind of risk will you primarily be exposed to

A. stand-alone risk

B. Portfolio risk

Generally, investors would prefer to invest in assets that have:

A. A low level of risk and high expected returns

B. A high level of risk and low expected returns

Answer 1

Answer: Please refer to Explanation

Explanation:

Your question is quite confusing as it has elements of other questions. However I shall try my best.

This type of risk relates to changes in the interest rate. SYSTEMATIC RISK.

This type of risk is inherent in a firm’s operations. UNSYSTEMATIC RISK.

A listing of each possible outcome and the probability of each outcome occurring. PROBABILITY DISTRIBUTION

This can be used to reduce the stand-alone risk of an investment by combining it with other investments in a portfolio. DIVERSIFICATION

You invest 100,000 in only one stock. What kind of risk will you primarily be exposed to?

- STANDALONE RISK

This is involving yourself with only one type of financial instruments. It can lead to massive losses if the value of the instrument goes down.

Generally, investors would prefer to invest in assets that have:

- A. A low level of risk and high expected returns.

Human beings are rationale beings that will always seek to maximise their utility. They do this under certain risk appetites but generally, people prefer that they get high returns for low risk. Essentially, people want money but they don't want to risk losing it to get it.

If you need any clarification do comment.