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:

Purchase of Merchandise

The acquisition of goods for resale, typically recorded as an inventory asset until the goods are sold.

Operating Activities

Refers to the primary activities that constitute the main revenue-producing activities of an organization, such as sales of goods or services.

Indirect Method

A financial reporting approach used for creating cash flow statements, where net income is adjusted for changes in balance sheet accounts to calculate cash flow from operating activities.

Operating Cash Receipts

Money received by a company from its core business operations, often reported during a specific time period.