Which of the Following Statements Is CORRECTσ

question 133

Multiple Choice

Which of the following statements is CORRECTσ

• A) the higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio.
• B) an investor can eliminate almost all risk if he or she holds a very large and well diversified portfolio of stocks.
• 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 almost all diversifiable risk if he or she holds a very large, well-diversified portfolio of stocks.
• E) an investor can eliminate almost all market risk if he or she holds a very large and well diversified portfolio of stocks.

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Definitions:

Budget

Company’s plan for how it will raise and spend money during a given period of time.

Asset Turnover Ratio

A financial metric that measures the efficiency of a company at using its assets to generate revenue or sales.

Return On Equity

A financial ratio that measures the amount of net income returned as a percentage of shareholders' equity, indicating the profitability of a company relative to owner's investments.

Profitability Ratio

A financial metric used to evaluate a company's ability to generate income relative to its revenue, operating costs, balance sheet assets, or shareholders' equity.