By Purchasing Shares in a Mutual Fund That Holds a Portfolio

question 26

Multiple Choice

By purchasing shares in a mutual fund that holds a portfolio of stocks,a person can

• A)benefit from fundamental analysis,since the mutual fund requires its shareholders to perform fundamental analysis on their own.
• B)benefit from fundamental analysis,since the mutual fund hires one or more individuals to perform fundamental analysis for the fund.
• C)eliminate market risk.
• D)reduce the standard deviation of his or her portfolio to zero.

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Definitions:

Measurement Error

The difference between a measured value and the true value, owing to inaccuracies in data collection or interpretation.

Variability

The extent to which data points in a dataset differ from each other and from their average value, indicating the spread or dispersion in the dataset.

True Score

In psychometrics, the actual score that accurately reflects the tested variable or trait in the absence of measurement errors.

Reliability

The degree to which an assessment tool produces stable and consistent results over multiple administrations under the same conditions.