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.

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Definitions:

Cash Collections

The process of gathering all cash or cash equivalents received from customers or clients for goods sold or services provided.

Finished Goods Inventory

This represents the value of all the goods that are completed and ready for sale but have not been sold yet.

Raw Materials

Basic materials used in the production process before being converted into finished products.

Direct Labor-Hours

The aggregate working hours of workers directly participating in creating products.