Which of the Following Statements Is CORRECT

question 67

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) 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 1-stock portfolio if that one stock has a beta less than 1.0.
• D) A large portfolio of stocks whose betas are greater than 1.0 will have less market risk than a single stock with a beta = 0.8.
• E) If you add enough randomly selected stocks to a portfolio, you can completely eliminate all of the market risk from the portfolio.

---

Definitions:

Validity Rules

The principles or criteria used to evaluate the soundness of an argument or reasoning process, ensuring that if the premises are true, the conclusion must also be true.

Categorical Proposition

A statement relating two classes or categories, asserting that all, some, or none of the members of one class are included in another.

Major Premise

In a syllogism, the first proposition which asserts a general principle.

Singular Propositions

Statements that make a claim about a specific single entity or unique instance.