Which of the Following Statements Is False

question 60

Multiple Choice

Which of the following statements is false?

• A) The volatility declines as the number of stocks in a portfolio grows.
• B) An equally weighted portfolio is a portfolio in which the same amount is invested in each stock.
• C) As the number of stocks in a portfolio grows large, the variance of the portfolio is determined primarily by the average covariance among the stocks.
• D) When combining stocks into a portfolio that puts positive weight on each stock, unless all of the stocks are uncorrelated with the portfolio, the risk of the portfolio will be lower than the weighted average volatility of the individual stocks.

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Definitions:

Credit Extension

The act of lending additional credit to borrowers or the period for which the credit is extended.

Receivables Financing

A form of financing where a company uses its accounts receivable as collateral to obtain a loan or advance, improving cash flow.

Variable Cost Per Unit

The cost that varies with the level of output or production, such as materials and labor, calculated on a per unit basis.

Monthly Interest Rate

Monthly interest rate refers to the percentage of interest that is charged or earned on a loan or investment for each month.