Which of the Following Statements Is CORRECT

question 30

Multiple Choice

Which of the following statements is CORRECT?

• A) An investor can eliminate virtually all market risk if he or she holds a large and well diversified portfolio of stocks.
• B) The higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio.
• C) It is impossible to have a situation where the market risk of a single stock is less than that of a portfolio that includes the stock.
• D) Once a portfolio has about 40 stocks, adding additional stocks will not reduce its risk by even a small amount.
• E) An investor can eliminate virtually all diversifiable risk if he or she holds a large, well diversified portfolio of stocks.

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Definitions:

Revenues

The total income generated from normal business operations and other activities over a period.

Assets

Resources owned by a business that are expected to provide future economic benefits.

Owner's Equity

Owner's equity represents the residual interest in the assets of an entity after deducting liabilities, essentially the net worth of a company.

Withdrawal

The act of taking money out of an account, or the removal of funds from a partnership by a partner for personal use.