If a Person Diversifies Her Stock Portfolio, Then

question 45

Multiple Choice

If a person diversifies her stock portfolio, then:

• A) the expected return of her portfolio will increase.
• B) the risk of her portfolio will decrease.
• C) both the risk and expected return of her portfolio will increase.
• D) neither the risk nor the expected return of her portfolio will change.

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Definitions:

Significance Level

A threshold below which a p-value is considered statistically significant, indicating that observed results are unlikely to be due to chance.

Critical Value

The point or points on the scale of a test statistic beyond which we reject the null hypothesis; these values define the threshold of significance.

Test Statistic

A value, derived from sample data, used in a hypothesis test to determine whether to reject the null hypothesis.

P-value

The probability of observing data at least as extreme as the observed data, given that the null hypothesis is true.