The Standard Deviation of a Portfolio Will Tend to Increase

question 95

Multiple Choice

The standard deviation of a portfolio will tend to increase when:

• A)a risky asset in the portfolio is replaced with Treasury bills.
• B)one of two shares related to the airline industry is replaced with a third share that is unrelated to the airline industry.
• C)the portfolio concentration in a single cyclical industry increases.
• D)the weights of the various diverse securities become more evenly distributed.
• E)short-term bonds are replaced with long-term bonds.

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Definitions:

Rapid Eye Movement

A phase of sleep characterized by fast and random movement of the eyes, associated with vivid dreaming and increased brain activity.

Sleep Time

The duration spent in the state of rest when the body is not awake and conscious, essential for physical and mental health.

Living Matter

Biological material that has the capacity to grow, reproduce, and maintain vital processes.

Water

The odorless and tasteless liquid that descends from the clouds as rain, forms streams, lakes, and seas, and is a major constituent of all living matter.