Portfolio a Has but One Security, While Portfolio B Has

question 8

True/False

Portfolio A has but one security, while Portfolio B has 100 securities.Because of diversification effects, we would expect Portfolio B to have the lower risk.However, it is possible for Portfolio A to be less risky.

---

Definitions:

Consumption

The action of using up goods and services to satisfy needs or desires.

Income

The financial gain received by an individual or entity, usually through employment, investments, or business operations.

Interest Rate

The percentage of principal charged by the lender for the use of its money.

Budget Constraint

An economic model that outlines the combination of goods and services a consumer can purchase given their income and the prices of those goods and services.