The Standard Deviation of a Portfolio Will Tend to Increase

question 15

Multiple Choice

The standard deviation of a portfolio will tend to increase when:

• A)a risky asset in the portfolio is replaced with U.S.Treasury bills.
• B)one of two stocks related to the airline industry is replaced with a third stock that is unrelated to the airline industry.
• C)the portfolio concentration in a single cyclical industry increases.
• D)the weights of the various diverse securities become more evenly distributed.
• E)short-term bonds are replaced with Treasury Bills.

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Definitions:

Private Sector Cost

The expense associated with goods, services, or activities delivered by businesses not owned or operated by the government.

Tax Compliance

The act of following and meeting all statutory responsibilities in tax reporting, payment, and documentation by individuals or entities.

Excess Burden

The cost to society created by market inefficiency, often associated with government intervention or taxation that distorts market equilibrium.

Personal Income Tax

A tax levied on individuals or households based on their total earned income from various sources.