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:

Planned Activity

Activities or tasks that have been scheduled and outlined in advance as part of a project or process planning.

Overhead Application

The process of assigning overhead costs to specific products or activity bases using a predetermined overhead rate.

Work in Process

Inventory that includes items that are in the production process but are not yet complete.

Product Cost

The total amount of expenses incurred to create and offer a product for sale, including direct materials, labor, and overhead costs.