Which of the Following Statements Best Describes What You Should

question 78

Multiple Choice

Which of the following statements best describes what you should expect to happen if you randomly select stocks and add them to your portfolio?

• A) Adding more such stocks will reduce the portfolio's unsystematic, or diversifiable, risk.
• B) Adding more such stocks will increase the portfolio's expected rate of return.
• C) Adding more such stocks will reduce the portfolio's beta coefficient and thus its systematic risk.
• D) Adding more such stocks will have no effect on the portfolio's risk.

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Definitions:

Drive

An inner urge that motivates individuals to accomplish goals, often influenced by biological, psychological, and societal factors.

Motivation

The reason or reasons one has for acting or behaving in a particular way; in a work context, it often refers to the factors that drive employees to achieve business objectives.

Cognitive Ability

The capacity of an individual to perform the various mental processes of reasoning, remembering, understanding, problem solving, and decision making.

Business Knowledge

Understanding of the aspects and functions of businesses, including management, operations, finance, and marketing.