Which of the Following Statements Is CORRECTσ

question 39

Multiple Choice

Which of the following statements is CORRECTσ

• A) diversifiable risk can be reduced by forming a large portfolio, but normally even highly-diversified portfolios are subject to market (or systematic) risk.
• B) a large portfolio of randomly selected stocks will have a standard deviation of returns that is greater than the standard deviation of a 1-stock portfolio if that one stock has a beta less than 1.0.
• C) a large portfolio of stocks whose betas are greater than 1.0 will have less market risk than a single stock with a beta = 0.8.
• D) if you add enough randomly selected stocks to a portfolio, you can completely eliminate all of the market risk from the portfolio.
• E) a large portfolio of randomly selected stocks will always have a standard deviation of returns that is less than the standard deviation of a portfolio with fewer stocks, regardless of how the stocks in the smaller portfolio are selected.

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Definitions:

Peer Pressure

The influence exerted by a peer group, encouraging individuals to change their attitudes, values, or behaviors to conform to group norms.

Teaching Children

The process of imparting knowledge, skills, and social norms to young individuals to facilitate their growth and development.

Loyalty

A strong feeling of support or allegiance, often displayed towards a group, product, or cause.

Norms

Shared rules or guidelines that dictate expected behavior and social practices within a group or society, often unwritten and learned through social interaction.