Which of the Following Statements Is CORRECT

question 70

Multiple Choice

Which of the following statements is CORRECT?

• A)The higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio.
• B)It is impossible to have a situation where the market risk of a single stock is less than that of a portfolio that includes the stock.
• C)Once a portfolio has about 40 stocks, adding additional stocks will not reduce its risk by even a small amount.
• D)An investor can eliminate virtually all diversifiable risk if he or she holds a very large, well-diversified portfolio of stocks.
• E)An investor can eliminate virtually all market risk if he or she holds a very large and well-diversified portfolio of stocks.

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Definitions:

Homogeneous Oligopolists

Firms within an oligopoly market structure that offer products or services that are very similar, making them close substitutes for each other.

Pure Monopoly

A market structure where a single firm controls the entire market for a product or service, with no close substitutes.

Kinked-Demand Curve

A demand curve that has a distinct bend or "kink" at a certain price level, often used to describe price stability in oligopolistic markets.

Highly Elastic

Refers to a market condition where the demand or supply for a product responds very significantly to changes in its price.