If a Stock Portfolio Is Well Diversified, Then the Portfolio

question 27

Multiple Choice

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

• A) will equal the variance of the most volatile stock in the portfolio.
• B) may be less than the variance of the least risky stock in the portfolio.
• C) must be equal to or greater than the variance of the least risky stock 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 variances of the individual securities in the portfolio.

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Definitions:

Cardiovascular Disease

A group of disorders of the heart and blood vessels, including coronary artery disease, hypertension, and stroke.

Health Problems

Any condition that impairs the normal functioning of the body, ranging from minor illnesses to chronic diseases and mental health disorders.

Stokols's Definition

Refers to a conceptual framework for understanding the interrelations among individuals, their environment, and health outcomes, as proposed by environmental psychologist Daniel Stokols.

Crowding

A condition characterized by a higher number of individuals in a space than is comfortable or sustainable, potentially leading to stress and decreased quality of life.