Which of the Following Statements Is CORRECT

question 129

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.

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Definitions:

Conviction

A firmly held belief or opinion, or the process of being declared legally guilty of an offense by the verdict of a jury or the decision of a judge.

Gotti Family

A notorious crime family based in New York, well-known for their involvement in organized crime activities.

Informant

An informant is a person who provides confidential information or intelligence, especially to the police or other authority.

Physical Change

A change in which the form of matter is altered but one substance is not transformed into another.