When a Security Is Added to a Portfolio the Appropriate

question 74

Multiple Choice

When a security is added to a portfolio the appropriate return and risk contributions are:

• A) the expected return of the asset and its standard deviation.
• B) the expected return and the variance.
• C) the expected return and the beta.
• D) the historical return and the beta.
• E) these both cannot be measured.

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Definitions:

Pure Competition

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information.

Profit-maximizing

A company's goal to achieve the highest possible profit where the marginal cost of production is equal to the marginal revenue from sales.

Market Demand

The total quantity of a good or service that all consumers in a market are willing and able to purchase at various prices.

Monopolist

An individual or entity that holds exclusive control over the supply of a particular good or service, allowing them to manipulate prices and market conditions.