The Standard Deviation of a Portfolio

question 48

Multiple Choice

The standard deviation of a portfolio:

• A)is a measure of that portfolio's systematic risk.
• B)is a weighed average of the standard deviations of the individual securities held in that portfolio.
• C)measures the amount of diversifiable risk inherent in the portfolio.
• D)serves as the basis for computing the appropriate risk premium for that portfolio.
• E)can be less than the weighted average of the standard deviations of the individual securities held in that portfolio.

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Definitions:

Financial Statement

A written record that conveys the financial activities and conditions of a business or individual.

Normal Balance

The side (debit or credit) of an account that increases its value, reflecting the conventional balance based on accounting rules.

Financial Statements

Documents that give an overview of a business's financial condition in both short and long term, including but not limited to, income statements, balance sheets, and statements of cash flows.

Worksheet

A worksheet is often a piece of paper or a digital document used by accountants to prepare adjustments and end-of-period financial statements.