If a Share Portfolio Is Well Diversified, Then the Portfolio

question 90

Multiple Choice

If a share portfolio is well diversified, then the portfolio variance:

• A)will equal the variance of the most volatile share in the portfolio.
• B)may be less than the variance of the least risky share in the portfolio.
• C)must be equal to or greater than the variance of the least risky share in the portfolio.
• D)will be a weighted average of the variances of the individual securities in the portfolio.
• E)will be an arithmetic average of the variance of the individual securities in the portfolio.

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Definitions:

Rent

A payment made periodically by a tenant to a landlord in exchange for the use of land, a building, or another property.

Fixed Costs

Costs that do not change with the level of output in the short term, such as rent, salaries, and insurance.

Variable Costs

Costs that vary directly with the level of production, such as materials and labor.

MC

In economics, MC typically refers to Marginal Cost, which is the cost of producing one more unit of a good.