Which One of the Following Statements Is Correct Concerning the Standard

question 122

Multiple Choice

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

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

---

Definitions:

Frederic Bastiat

A 19th-century French economist and writer known for his advocacy of classical liberalism and his witty criticisms of protectionism.

Trade Protectionism

Government policies designed to restrict international trade to protect domestic industries from foreign competition.

Government Restrictions

Regulations implemented by the government that limit or guide the actions of individuals or companies, often in the interest of public safety or economic stability.

Low-Wage Nation

A country where the general level of wages and salaries is significantly lower than that of more industrialized and economically developed countries.