Jane Has a Portfolio of 20 Average Stocks,and Dick Has

question 75

Multiple Choice

Jane has a portfolio of 20 average stocks,and Dick has a portfolio of 2 average stocks.Assuming the market is in equilibrium,which of the following statements is CORRECT?

• A) Jane's portfolio will have less diversifiable risk and also less market risk than Dick's portfolio.
• B) The required return on Jane's portfolio will be lower than that on Dick's portfolio because Jane's portfolio will have less total risk.
• C) Dick's portfolio will have more diversifiable risk,the same market risk,and thus more total risk than Jane's portfolio,but the required (and expected)returns will be the same on both portfolios.
• D) If the two portfolios have the same beta,their required returns will be the same,but Jane's portfolio will have less market risk than Dick's.
• E) The expected return on Jane's portfolio must be lower than the expected return on Dick's portfolio because Jane is more diversified.

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Definitions:

Total Manufacturing Costs

This encompasses all the direct materials, direct labor, and factory overhead costs involved in producing goods.

Units Transferred Out

In cost accounting, it refers to the number of units moved from one production process to the next or to the finished goods inventory.

Ending Work In Process

This signifies the inventory of goods that are still in the process of being produced at the end of an accounting period.

Conversion Costs

Costs incurred during the transformation of raw materials into finished goods, typically including labor and overhead expenses.