Which One of the Following Statements Is Correct Concerning a Portfolio

question 88

Multiple Choice

Which one of the following statements is correct concerning a portfolio of 20 securities with multiple states of the economy when both the securities and the economic states have unequal weights?

• A) Given the unequal weights of both the securities and the economic states, the standard deviation of the portfolio must equal that of the overall market.
• B) The weights of the individual securities have no effect on the expected return of a portfolio when multiple states of the economy are involved.
• C) Changing the probabilities of occurrence for the various economic states will not affect the expected standard deviation of the portfolio.
• D) The standard deviation of the portfolio will be greater than the highest standard deviation of any single security in the portfolio given that the individual securities are well diversified.
• E) Given both the unequal weights of the securities and the economic states, an investor might be able to create a portfolio that has an expected standard deviation of zero.

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Definitions:

Procedural Memories

The type of long-term memory responsible for knowing how to do things, also known as motor skills, involving the learning of tasks.

Infantile Amnesia

The inability of adults to recall personal memories from early childhood, typically before the age of three or four.

Explicit Memories

Memories of specific facts and experiences that individuals can consciously know and declare.

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Concerns memories that are unconsciously and automatically retrieved, influencing thoughts and behaviors without explicit awareness.