Jane Holds a Large Diversified Portfolio of 100 Randomly Selected

question 17

Multiple Choice

Jane holds a large diversified portfolio of 100 randomly selected stocks and the portfolio's beta = 1.2. Each of the individual stocks in her portfolio has a standard deviation of 20 percent. Jack has the same amount of money invested in a single stock with a beta equal to 1.6 and a standard deviation of 20 percent. Which of the following statements is most correct?

• A) Jane's portfolio has a larger amount of company-specific risk since she is holding more stocks in her portfolio.
• B) Jane has a higher required rate of return, since she is more diversified.
• C) Jane's portfolio has less market risk since it has a lower beta.
• D) Statements b and c are correct.
• E) None of the statements above is correct.

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Definitions:

Possible Risk

A potential hazard or danger that may lead to harm or adverse outcomes if not properly managed or avoided.

Etiology

The study of the causes or origins of diseases or medical conditions.

Risk Nursing Diagnosis

A clinical judgment about individual, family, or community responses to potential health problems/life processes that a nurse identifies as being necessary for intervention to prevent or mitigate problems.

Possible Nursing Diagnosis

A judgment made in a clinical setting about how an individual, family, or community deals with actual or possible health complications or life phenomena.