A Portfolio Is Comprised of fiVe Risky Stocks

question 12

Multiple Choice

A portfolio is comprised of five risky stocks. The standard deviations of these stocks are 5.6%, 12.8%, 2.3%, 8.9%, and 10.2%. The standard deviation of the portfolio:

• A) Is equal to the arithmetic average of the individual standard deviations.
• B) Must be greater than 2.3%.
• C) Must equal that of the market.
• D) Is equal to the weighted average of the individual standard deviations.
• E) Cannot be determined from the information provided.

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Definitions:

Zuckerman

Refers to Marvin Zuckerman, an American psychologist known for his research on sensation seeking as a personality trait.

Sensation Seeking

A trait describing the tendency to seek out novel, varied, complex, and intense sensations and experiences, and the willingness to take risks for the sake of such experiences.

Adventure

An exciting or remarkable experience involving uncertain outcomes and risks.

Zuckerman's Research

Refers to the body of work by psychologist Marvin Zuckerman, focusing on sensation seeking, personality traits, and their biological bases.