Which of the Following Statements Best Describes Risk

question 30

Multiple Choice

Which of the following statements best describes risk?

• A) An investor can eliminate virtually all market risk if he or she holds a very 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) An investor can eliminate virtually all diversifiable risk if he or she holds a very large, well-diversified portfolio of stocks.

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Definitions:

Senior Citizens

Individuals who have reached a certain age, often associated with retirement and receiving certain benefits due to their age.

Income Elasticity

A measure of how the quantity demanded of a good changes in response to a change in consumers' income.

BMW

A German multinational company that produces luxury vehicles and motorcycles.

North America

A continent located in the northern hemisphere, bounded by the Arctic Ocean, Atlantic Ocean, and Pacific Ocean.