The Standard Deviation of a Portfolio Will Tend to Increase

question 56

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) short-term bonds are replaced with Treasury Bills.
• C) the portfolio concentration in a single cyclical industry increases.
• D) the weights of the various diverse securities become more evenly distributed.

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Definitions:

Save

Setting aside money or other resources for future use or in case of emergencies.

Consume

The action of using up goods or services, thus leading to a reduction in available quantity.

GDP

The entirety of value generated from goods and services within a country's borders throughout a specific duration sums up what is known as the Gross Domestic Product.

Government Purchases

Expenditures by government for goods and services that directly satisfy collective needs or affect the economy’s total demand.