The Standard Deviation of a Portfolio

question 54

Multiple Choice

The standard deviation of a portfolio:

• A) is a weighted average of the standard deviations of the individual securities held in the portfolio.
• B) can never be less than the standard deviation of the most risky security in the portfolio.
• C) must be equal to or greater than the lowest standard deviation of any single security held in the portfolio.
• D) is an arithmetic average of the standard deviations of the individual securities which comprise the portfolio.
• E) can be less than the standard deviation of the least risky security in the portfolio.

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Definitions:

Absorption Costing

The accounting methodology that integrates all costs related to manufacturing, including direct materials, direct labor, and both forms of manufacturing overhead—variable and fixed—into a product's total cost.

Variable Costing

A financial tracking method that considers just the variable operating costs (direct materials, direct labor, and variable manufacturing overhead) in the pricing of merchandise.

Unit Product Cost

The overall expense incurred to manufacture a single item, encompassing direct materials, direct labor, and overhead costs.

Absorption Costing

Absorption costing is an accounting method that includes all of the manufacturing costs (direct materials, direct labor, and overhead) in the cost of a product.