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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