Which of the Following Statements Is CORRECT

question 5

Multiple Choice

Which of the following statements is CORRECT?

• A) An investor can eliminate virtually all market risk if he or she holds a very large and well diversified portfolio of stocks.
• B) The higher the correlation between the stocks in a portfolio,the lower the risk inherent in the portfolio.
• C) It is impossible to have a situation where the market risk of a single stock is less than that of a portfolio that includes the stock.
• D) Once a portfolio has about 40 stocks,adding additional stocks will not reduce its risk by even a small amount.
• E) An investor can eliminate virtually all diversifiable risk if he or she holds a very large,well-diversified portfolio of stocks.

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Definitions:

Common Stockholders

Individuals or entities that own common stock in a company, granting them voting rights and a share in the company's profits through dividends.

Paid-in Capital

The amount of money that a company receives from selling its stock directly to investors, above the par value of the shares.

Real Estate Transactions

Deals involving the sale, purchase, or exchange of property between parties.

Cash Dividends

Payments made by a company to its shareholders from its profits or reserves.