Which One of the Following Statements Is Correct Concerning the Standard

question 9

Multiple Choice

Which one of the following statements is correct concerning the standard deviation of a portfolio?

• A)The greater the diversification of a portfolio,the greater the standard deviation of that portfolio.
• B)The standard deviation of a portfolio can often be lowered by changing the weights of the securities in the portfolio.
• C)Standard deviation is used to determine the amount of risk premium that should apply to a portfolio.
• D)The standard deviation of a portfolio is equal to the geometric average standard deviation of the individual securities held within that portfolio.
• E)The standard deviation of a portfolio is equal to a weighted average of the standard deviations of the individual securities held within the portfolio.

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Definitions:

Share Price

The present rate at which an individual share of a corporation's stock is available for purchase or sale on the market.

Stock Listed

A company's shares that are available for trading on a public stock exchange.

Share Repurchase

A corporate action in which a company buys back its own shares from the marketplace, often to increase the value of remaining shares.

Cash Dividend Payment

A cash dividend payment is a distribution of profits by a corporation to its shareholders in the form of cash.