Which of the Following Statements Is FALSE

question 57

Multiple Choice

Which of the following statements is FALSE?

• A)The volatility declines as the number of stocks in a portfolio grows.
• B)An equally weighted portfolio is a portfolio in which the same amount is invested in each stock.
• C)As the number of stocks in a portfolio grows large,the variance of the portfolio is determined primarily by the average covariance among the stocks.
• D)When combining stocks into a portfolio that puts positive weight on each stock,unless all of the stocks are uncorrelated with the portfolio,the risk of the portfolio will be lower than the weighted average volatility of the individual stocks.

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Definitions:

Marginal Cost

Marginal Cost is the cost incurred by producing one additional unit of a product.

Cartel

An association of independent businesses or countries that collaborate to control prices and limit competition within a particular market or industry.

Market Price

The prevailing cost at which one can buy or sell an asset or service.

Marginal Cost

The augmentation in total costs associated with the production of an additional unit of a product or service.