Portfolio a Has but One Security, While Portfolio B Has

question 77

True/False

Portfolio A has but one security, while Portfolio B has 100 securities. Because of diversification effects, we would expect Portfolio B to have the lower relevant risk, but it is possible for Portfolio A to be less risky.

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Definitions:

Fourth Worker

In the context of diminishing returns, it could refer to a point where adding an additional worker leads to a lesser increase in output.

Marginal Productivity

The extra output that a business gains by adding one more unit of input, such as labor or capital.

Income Distribution

The way in which a country’s total GDP is spread amongst its population, affecting economic equity and quality of life.

Value Added

The increase in the value of a product or service as it passes through each stage of production or supply chain.