The Standard Deviation of a Portfolio Will Tend to Increase

question 52

Multiple Choice

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

• A)the portfolio concentration in a single cyclical industry increases.
• B)one of two stocks related to the airline industry is replaced with a third stock that is unrelated to the airline industry.
• C)a risky asset in the portfolio is replaced with U.S.Treasury bills.
• 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:

Social Institutions

Established systems or structures within a society that govern the behavior and expectations of individuals, such as family, education, and government.

Raised In Isolation

The condition of being brought up in an environment that is significantly devoid of normal social interaction and exposure to the outside world.

Develop Normally

The process of growing or evolving according to expected patterns or stages of physical, mental, or emotional growth.

Total Institutions

are places of residence and work where large numbers of individuals are cut off from wider society for a considerable period, leading lives enclosed and regulated by the institution.