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The Standard Deviation of a Portfolio Is a Function Only

question 31

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The standard deviation of a portfolio is a function only of the standard deviations of the individual securities in the portfolio and the proportion of the portfolio invested in those securities.


Definitions:

Economic Profits

Profits exceeding the opportunity costs of a company; considered an indicator of efficiency and entrepreneurship.

Average Total Cost

The total cost of production divided by the total quantity of goods produced, representing the cost per unit.

Average Variable Cost

The cost of labor and materials divided by the quantity of output produced, reflecting costs that change with the level of output.

Average Total Cost

The total cost of production divided by the quantity of output produced; it includes both fixed and variable costs.

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