Which of the Following Statements Is CORRECT

question 3

Multiple Choice

Which of the following statements is CORRECT?

• A) A large portfolio of randomly selected stocks will always have a standard deviation of returns that is less than the standard deviation of a portfolio with fewer stocks,regardless of how the stocks in the smaller portfolio are selected.
• B) Diversifiable risk can be reduced by forming a large portfolio,but normally even highly-diversified portfolios are subject to market (or systematic)risk.
• C) A large portfolio of randomly selected stocks will have a standard deviation of returns that is greater than the standard deviation of a 1-stock portfolio if that one stock has a beta less than 1.0.
• D) A large portfolio of stocks whose betas are greater than 1.0 will have less market risk than a single stock with a beta = 0.8.
• E) If you add enough randomly selected stocks to a portfolio,you can completely eliminate all of the market risk from the portfolio.

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Definitions:

Corn Producers

Individuals or entities engaged in the cultivation and sale of corn.

Supply Curve

The supply curve is a graphical representation of the relationship between the price of a good or service and the quantity of it that producers are willing to supply, typically showing an upward slope, indicating that higher prices incentivize more supply.

Supply Curve

A graphical representation of the relationship between the price of a good and the quantity supplied, typically upwards sloping, indicating higher quantities supplied at higher prices.

Prices Rise

An economic condition where the cost of goods and services increases over time, affecting purchasing power.