Which of the Following Statements Concerning Measures of Risk Is

question 53

Multiple Choice

Which of the following statements concerning measures of risk is correct?

• A) Combining stocks together in portfolios reduces risk as long as the correlation between the returns on the securities is not perfect .
• B) Even if the correlation between the returns on two different securities is perfectly positive,if the securities are combined in the correct unequal proportions,the resulting portfolio can have less risk than either security held alone.
• C) The coefficient of variation,calculated as the expected return divided by the standard deviation,is a standardized measure of the correlation of risk and return.
• D) The tighter the probability distribution of expected future returns the smaller the risk of a given investment as measured by both the variance and the standard deviation.
• E) Variance is a measure of the variability of returns and because it involves squaring each deviation of the required return from the expected return,it is always larger than its square root,the standard deviation.

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Definitions:

Chromosomal Damage

Structural or numerical alterations in chromosomes that can lead to various genetic disorders or diseases.

Carriers of PKU

are individuals who possess one defective gene for phenylketonuria (PKU) from one parent, potentially passing the condition to their offspring, but typically do not exhibit symptoms themselves.

Disorder Development

Disorder development relates to the progression or emergence of psychological, physical, or developmental conditions that interrupt normal functioning.

Multifactorial Problems

Problems that stem from the interaction of heredity and environmental factors.