An Investor Who Diversifies by Purchasing a 50-50 Mix of Two

question 65

Multiple Choice

An investor who diversifies by purchasing a 50-50 mix of two stocks that are not perfectly positively correlated will find that the standard deviation of the portfolio is:

• A) the sum of the standard deviations of the two individual stocks.
• B) greater than the sum of the standard deviations of the individual stocks.
• C) greater than the standard deviation from holding the same balance in only one of these stocks.
• D) less than the standard deviation from holding the same balance in only one of these stocks.

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Definitions:

Dissatisfied

The feeling of not being content or pleased with an outcome, service, or product.

Large Companies

Corporations and businesses that have a large scale of operations, employees, or revenue.

Survey

A research method used for collecting data from a predefined group of respondents to gain information and insights on various topics of interest.

Random Variable

A variable whose value is subject to variations due to chance.