A Portfolio of Assets Has Lower Risk Than Holding One

question 32

Multiple Choice

A portfolio of assets has lower risk than holding one asset, but the same expected return and higher transaction costs. Which of the following statements is most correct?

• A) The portfolio is attractive to people who are risk-averse and risk-neutral, but not to risk seekers.
• B) The portfolio is attractive to investors who are risk-neutral.
• C) The portfolio is not attractive to investors who are risk-neutral.
• D) The portfolio is attractive to investors who are risk seekers.

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Definitions:

Random Samples

Selections made in such a way that each individual in the population has an equal chance of being included in the sample.

F-test Statistic

A value calculated for conducting an F-test, used to compare variances across groups to determine if they differ significantly.

Level of Significance

A threshold within hypothesis testing used to determine if there is enough evidence to reject the null hypothesis, often set at 0.05.

Critical Value

The threshold value that the test statistic must exceed for the null hypothesis to be rejected, dependent on the chosen significance level.