Which of the Following Statements Best Describes What You Should

question 10

Multiple Choice

Which of the following statements best describes what you should expect if you randomly select stocks and add them to your portfolio?

• A) Adding more such stocks will reduce the portfolio's unsystematic,or diversifiable,risk.
• B) Adding more such stocks will increase the portfolio's expected rate of return.
• C) Adding more such stocks will reduce the portfolio's beta coefficient and thus its systematic risk.
• D) Adding more such stocks will have no effect on the portfolio's risk.
• E) Adding more such stocks will reduce the portfolio's market risk but not its unsystematic risk.

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Definitions:

Output

The total amount of goods or services produced by a company or country.

Marginal Product Curve

A graphical representation showing how the additional output of a firm varies with the addition of one more unit of a variable input, holding all other inputs constant.

Total Product

The overall quantity of output that a firm produces, usually specified in relation to a given quantity of inputs.

Total Product

The overall quantity of output produced by a firm from a given quantity of inputs, in the context of production theory.