Which of the Following Statements Regarding Portfolio Risk and Number

question 23

Multiple Choice

Which of the following statements regarding portfolio risk and number of stocks is generally true?

• A)Adding more stocks increases risk
• B)Adding more stocks decreases risk but does not eliminate it
• C)Adding more stocks has no effect on risk
• D)Adding more stocks increases only systematic risk

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Definitions:

Bullish Outlook

An expectation that a market, security, or economy will rise in value in the foreseeable future.

Out-of-the-money

A term used in options trading referring to options that would not make a profit if exercised immediately because their strike price is unfavorable compared to the current market price.

In-the-money

Describes an option with intrinsic value; for a call option, when the underlying asset's price is above the strike price; for a put option, when it's below.

Put Option

A financial contract that gives the buyer the right, but not the obligation, to sell an underlying asset at a specified price within a certain timeframe.