Which One of the Following Statements Is Correct Concerning the Standard

question 29

Multiple Choice

Which one of the following statements is correct concerning the standard deviation of a portfolio?

• A)Standard deviation is used to determine the amount of risk premium that should apply to a portfolio.
• B)The greater the diversification of a portfolio,the greater the standard deviation of that portfolio.
• C)Standard deviation measures only the systematic risk of a portfolio.
• D)The standard deviation of a portfolio can often be lowered by changing the weights of the securities in the portfolio.
• E)The standard deviation of a portfolio must equal the weighted average of the standard deviations of the individual securities held within the portfolio.

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Definitions:

Perfectly Inelastic

A situation where the demand for a product does not change in response to changes in price, illustrated by a vertical demand curve.

Heart Transplants

A medical procedure involving the replacement of a patient's diseased heart with a healthy heart from a donor.

Price Elasticity

A measure of the sensitivity of the quantity demanded or quantity supplied of a good to a change in its price.

Perfectly Inelastic

This describes a situation in economics where the demand or supply for a good is completely unresponsive to changes in price.