Which of the Following Statements Is Correct

question 45

Multiple Choice

Which of the following statements is correct?

• A)A large portfolio of randomly selected stocks will always have a standard deviation of returns that is less than the standard deviation of a portfolio with fewer stocks, regardless of how the stocks in the smaller portfolio are selected.
• B)Company-specific (or diversifiable) risk can be reduced by forming a large portfolio, but normally even highly diversified portfolios are subject to market (or systematic) risk.
• C)A large portfolio of randomly selected stocks will have a standard deviation of returns that is greater than the standard deviation of a one-stock portfolio if that one stock has a beta less than 1.0.
• D)If you add enough randomly selected stocks to a portfolio, you can completely eliminate all of the market risk from the portfolio.

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