Which of the Following Statements Is Most Correct

question 13

Multiple Choice

Which of the following statements is most correct?

• A) The expected return on a portfolio of financial assets is equal to the summation of the products of the expected returns of the individual assets multiplied by the probability of each return being realized.
• B) When adding new securities to a portfolio,the higher or more positive the degree of correlation between the new securities and those already in the portfolio,the greater the benefits of the additional portfolio diversification.
• C) In portfolio analysis,we rarely use ex post (historical)returns and standard deviations,because we are interested in ex ante (future)data.
• D) Portfolio diversification reduces the variability of returns on each security held in the portfolio.
• E) All of the above statements are false.

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Definitions:

Attribution Theory

A social psychology theory focused on how people interpret and identify the causes of others’ behavior, attributing it to either internal dispositions or external situations.

Basic Assumptions

Fundamental beliefs or principles that are accepted as true without proof and form the basis for reasoning or behavior.

Dispositional

pertaining to stable characteristics or traits of an individual that influence their behaviors and attitudes.

Kelley's Attribution Theory

A framework suggesting that people interpret their own and others' behaviors by attributing them to either internal dispositions or external situations.