Which One of the Following Statements Is Correct Concerning the Standard

question 46

Multiple Choice

Which one of the following statements is correct concerning the standard deviation of a portfolio?

• A)Standard deviation is used to determine the amount of risk premium that should apply to a portfolio.
• B)The greater the diversification of a portfolio,the greater the standard deviation of that portfolio.
• C)Standard deviation measures only the systematic risk of a portfolio.
• D)The standard deviation of a portfolio can often be lowered by changing the weights of the securities in the portfolio.
• E)The standard deviation of a portfolio is equal to a weighted average of the standard deviations of the individual securities held within the portfolio.

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Definitions:

Merchandising Companies

Businesses that purchase goods in finished form for the purpose of reselling them to customers without further processing.

Resale

Resale refers to the process of selling a previously purchased product, generally used or surplus items, to another buyer.

Financial Accounting

The branch of accounting that is concerned with recording transactions using generally accepted accounting principles (GAAP) for a business or other economic unit and with a periodic preparation of various statements from such records.

Business

An organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers.