Which One of the Following Statements Is Correct

question 27

Multiple Choice

Which one of the following statements is correct?

• A)A portfolio variance is a weighted average of the variances of the individual securities which comprise the portfolio.
• B)A portfolio variance is dependent upon the portfolio's asset allocation.
• C)A portfolio variance is unaffected by the correlations between the individual securities held in the portfolio.
• D)The portfolio variance must be greater than the lowest variance of any of the securities held in the portfolio.
• E)The portfolio variance must be less than the lowest variance of any of the securities held in the portfolio.

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Definitions:

Nonexcludable

A characteristic of a good or service that prevents the owner from effectively excluding others from using it, often leading to free-rider problems.

Public Good

Goods that are non-excludable and non-rivalrous, meaning that consumption by one individual does not reduce availability to others, and people cannot be prevented from using them.

Consumption

The act of using goods and services by households.

External Costs

Costs of economic activity not borne by the producer or consumer but by society, often not reflected in the price of goods or services.