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:

Price

The financial cost of acquiring a good, service, or asset.

Apples

Edible fruits from the species Malus domestica, known for their sweet to tart flavor and use in a variety of culinary dishes and products.

Bananas

A long, curved fruit with a yellow skin and soft, sweet flesh inside, grown in many tropical regions of the world.

Perfect Complements

Goods that are used together in fixed proportions due to the nature of their consumption or utility.