Jane Has a Portfolio of 20 Average Stocks, and Dick

question 31

Multiple Choice

Jane has a portfolio of 20 average stocks, and Dick has a portfolio of 2 average stocks. Assuming the market is in equilibrium, which of the following statements is CORRECT?

• A) Jane's portfolio will have less diversifiable risk and also less market risk than Dick's portfolio.
• B) The required return on Jane's portfolio will be lower than that on Dick's portfolio because Jane's portfolio will have less total risk.
• C) Dick's portfolio will have more diversifiable risk, the same market risk, and thus more total risk than Jane's portfolio, but the required (and expected) returns will be the same on both portfolios.
• D) If the two portfolios have the same beta, their required returns will be the same, but Jane's portfolio will have less market risk than Dick's.

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Definitions:

Marginal Product

The increase in output that arises from an additional unit of input.

Customers Served

The number or segment of clients to whom a business has provided goods or services.

Marginal Products

The additional output that results from using one more unit of a particular input, holding all other inputs constant.

Sales Clerks

Employees in retail stores responsible for assisting customers, conducting transactions, and maintaining the arrangement of goods.