Which of the Following Statements Is Correct

question 45

Multiple Choice

Which of the following statements is correct?

• A)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.
• B)Company-specific (or diversifiable) risk can be reduced by forming a large portfolio, but normally even highly diversified portfolios are subject to market (or systematic) risk.
• C)A large portfolio of randomly selected stocks will have a standard deviation of returns that is greater than the standard deviation of a one-stock portfolio if that one stock has a beta less than 1.0.
• D)If you add enough randomly selected stocks to a portfolio, you can completely eliminate all of the market risk from the portfolio.

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Definitions:

Conversion

The unauthorized act of taking someone else's property and converting it to one's own use, violating the owner's rights.

Indorsement

The act of signing one's name on the back of a check or other negotiable instrument for the purpose of transferring ownership or to approve the terms.

Action

A legal term referring to a civil lawsuit or proceeding initiated to protect a right or redress a grievance.

Revised Article 3

Refers to updates made to Article 3 of the Uniform Commercial Code that governs negotiable instruments, including checks and drafts, in the United States.