The Standard Deviation of a Portfolio Will Tend to Increase

question 48

Multiple Choice

The standard deviation of a portfolio will tend to increase when:

• A)a risky asset in the portfolio is replaced with Treasury bills.
• B)one of two shares related to the airline industry is replaced with a third share that is
• Unrelated to the airline industry.
• C)the portfolio concentration in a single cyclical industry increases.
• D)the weights of the various diverse securities become more evenly distributed.
• E)short-term bonds are replaced with long-term bonds.

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Definitions:

Cleavage

In geology, the tendency of crystalline materials to split along definite crystalline boundaries, creating smooth surfaces.

Hardness

A measure of a mineral's resistance to scratching, which aids in identifying minerals in field and lab settings.

Ionic

Relating to or involving ions, which are atoms or molecules with a net electric charge due to the loss or gain of one or more electrons.

Covalent

referring to chemical bonds formed by the sharing of electron pairs between atoms.