In a Highly Diversified Portfolio, the Standard Deviation of the Portfolio

question 40

Multiple Choice

In a highly diversified portfolio, the standard deviation of the portfolio will be equal to:

• A) Zero.
• B) One.
• C) The portfolio beta.
• D) The systematic risk.
• E) The risk premium of the portfolio.

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Definitions:

Personal Causation

An individual's perception of their capability to influence or produce effects in their life.

Extrinsic Motive

An external incentive for behavior, such as rewards or punishments, that influences one's actions.

Self-actualized Person

An individual who has realized and fulfilled their potential, achieving self-fulfillment and reaching the highest level of Maslow's hierarchy of needs.

Time Competence

The ability to live in the present while utilizing past experiences and considering future consequences in decision-making.