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:

Sustainable Growth

The rate at which a company can grow its sales, earnings, and dividends without increasing its equity or taking on new debt.

Earnings Retention

The portion of a company's profit that is kept or retained rather than distributed to shareholders as dividends.

Total Asset Turnover

A metric indicating how effectively a firm utilizes its assets to produce sales income.

External Financing

Funds that a business obtains from outside sources to cover its operational needs and finance growth, including debt and equity financing.