Which of the following statements is correct? a. portfolio diversification reduces the variability of returns on an individual stock. b. risk refers to the chance that some unfavorable event will occur, and a probability distribution is completely described by a listing of the likelihood of unfavorable events. c. 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 by such actions as changing the firm's capital structure or the type of assets it employs. d. a stock with a beta of −1.0 has zero market risk if held in a 1-stock portfolio. e. when diversifiable risk has been diversified away, the inherent risk that remains is market risk, which is constant for all stocks in the market.

For each of the following situations, indicate whether you agree or disagree with the financial reporting practice employed and state the basic assumption, component, or accounting principle that is applied (if you agree) or violated (if you disagree).wagner corporation adjusted the valuation of all assets and liabilities to reflect changes in the purchasing power of the dollar. spooner oil company changed its method of accounting for oil and gas exploration costs from successful efforts to full cost. no mention of the change was included in the financial statements. the change had a material effect on spooner's financial statements. cypress manufacturing company purchased machinery having a five-year life. the cost of the machinery is being expensed over the life of the machinery. rudeen corporation purchased equipment for $180,000 at a liquidation sale of a competitor. because the equipment was worth $230,000, rudeen valued the equipment in its subsequent balance sheet at $230,000.davis bicycle company received a large order for the sale of 1,000 bicycles at $100 each. the customer paid davis the entire amount of $100,000 on march 15. however, davis did not record any revenue until april 17, the date the bicycles were delivered to the customer. gigantic corporation purchased two small calculators at a cost of $32.00. the cost of the calculators was expensed even though they had a three-year estimated useful life. esquire company provides financial statements to external users every three years.