Which of the Following Statements Is CORRECT

question 65

Multiple Choice

Which of the following statements is CORRECT?

• A) A two-stock portfolio will always have a lower standard deviation than a one-stock portfolio.
• B) A portfolio that consists of 40 stocks that are not highly correlated with "the market" will probably be less risky than a portfolio of 40 stocks that are highly correlated with the market,assuming the stocks all have the same standard deviations.
• C) A two-stock portfolio will always have a lower beta than a one-stock portfolio.
• D) If portfolios are formed by randomly selecting stocks,a 10-stock portfolio will always have a lower beta than a one-stock portfolio.
• E) A stock with an above-average standard deviation must also have an above-average beta.

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Definitions:

Retinal Image Theory

The hypothesis that the retina captures visual images like a camera, which are then processed by the brain.

Perceptual Constancy

A feature of perception in which physical objects are perceived as unvarying and consistent despite changes in their appearance or in the physical environment.

Linear Perspective

A monocular cue for depth perception, where parallel lines appear to converge in the distance, helping the brain perceive spatial relationships.

Brightness

The attribute of visual perception in accordance with which an area appears to emit more or less light.