If Investors Are Risk Averse and Hold Only One Stock

question 97

True/False

If investors are risk averse and hold only one stock, we can conclude that the required rate of return on a stock whose standard deviation is 0.21 will be greater than the required return on a stock whose standard deviation is 0.10.However, if stocks are held in portfolios, it is possible that the required return could be higher on the stock with the low standard deviation.

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Definitions:

Self-concept Expectations

The beliefs and anticipations about one's abilities, behaviors, and characteristics that shape one's self-concept.

Self-esteem Expectations

The beliefs individuals hold about their ability to succeed and their worthiness of success and happiness, influencing motivation and behavior.

Psychosocial Development Theory

A theory proposed by Erik Erikson that suggests human development is governed by a series of stages that depend on biological maturation and social demands, emphasizing the social nature of our development rather than its sexual nature.

Psychosexual Theory

A theory proposed by Sigmund Freud that suggests human development occurs in stages, each characterized by sexual pleasure centered on a particular erogenous zone.