Which of the Following Statements Is FALSE

question 5

Multiple Choice

Which of the following statements is FALSE?

• A)The expected return of a portfolio is equal to the weighted average expected return,but the volatility of a portfolio is less than the weighted average volatility.
• B)Each security contributes to the volatility of the portfolio according to its volatility,scaled by its covariance with the portfolio,which adjusts for the fraction of the total risk that is common to the portfolio.
• C)Nearly half of the volatility of individual stocks can be eliminated in a large portfolio as a result of diversification.
• D)The overall variability of the portfolio depends on the total co-movement of the stocks within it.

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Definitions:

Note

A financial instrument that represents a debt or obligation between two parties, wherein the issuer promises to pay the holder a certain amount of money at a future date.

Adjusting Journal Entry

An entry made in the accounting journals at the end of an accounting period to allocate items between accounting periods.

Allowance for Doubtful Accounts

An estimate of the amount of accounts receivable that may not be collected, used to reduce the carrying amount of receivables on the balance sheet.

Net Realizable Value

The estimated selling price of goods, minus the costs of their sale or disposal.