Which of the Following Statements Is Most Correct

question 104

Multiple Choice

Which of the following statements is most correct?

• A) Portfolio diversification reduces the variability of the returns on the individual stocks held in the portfolio.
• B) Portfolio A has but one security,while Portfolio B has 100 securities.Because of diversification,we would expect Portfolio B to have the lower relevant risk,but it is possible for Portfolio A to be less risky.
• C) If an investor buys enough stocks,he or she can,through diversification,eliminate all of the nonmarket (or company-specific)risk inherent in owning stocks.Indeed,if the portfolio contained some of all publicly traded stocks,it would be riskless.
• D) Statements a,b,and c are all true.
• E) Statements a,b,and c are all false.

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Definitions:

Evaporation

The process by which water transforms from a liquid to a gas or vapor, often driven by heat from the sun.

Seawater

The saltwater that makes up the oceans and seas, covering more than 70% of the Earth's surface.

Sediment

Particles of organic or inorganic matter that settle out of suspension in water, air, or ice, and accumulate in layers on the earth's surface.

Energetic Current

Refers to a strong, dynamic movement of water, often in the ocean, that can transport sediments and influence marine and coastal processes.