Which of the Following Statements Is CORRECT

question 45

Multiple Choice

Which of the following statements is CORRECT?

• A) Diversifiable risk can be reduced by forming a large portfolio, but normally even highly-diversified portfolios are subject to market (or systematic) risk.
• B) 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.
• C) 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.
• D) If you add enough randomly selected stocks to a portfolio, you can completely eliminate all of the market risk from the portfolio.
• E) 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.

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Definitions:

Dark Skin

Skin type with higher melanin content, providing greater protection against ultraviolet radiation but varying significantly within and across different populations.

Small Intestine

A part of the gastrointestinal tract between the stomach and large intestine, where most of the digestion and absorption of nutrients occurs.

Lactase

An enzyme in the small intestine that enables humans to assimilate lactose (milk sugar).

Melanin

A pigment found in most organisms, responsible for coloration of the skin, hair, and eyes, and protection against UV radiation.