Which Statement About Risk Is True

question 85

Multiple Choice

Which statement about risk is true?

• A)An investor can eliminate virtually all market risk if he or she holds a very large and well-diversified portfolio of stocks.
• B)The higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio.
• C)It is impossible to have a situation where the market risk of a single stock is less than that of a portfolio that includes the stock.
• D)An investor can eliminate virtually all diversifiable risk if he or she holds a very large, well-diversified portfolio of stocks.

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Definitions:

Degrees Of Freedom

Degrees of freedom refer to the number of independent values or quantities which can be assigned to a statistical distribution, while still adhering to a given constraint.

Paired Populations

Refers to when two sets of data are directly linked or matched together, often used in studies involving before-and-after comparisons.

Sample Size

The number of observations or datapoints selected from a population to be included in a sample.

Significant Difference

A result in data indicating that the observed effect or difference is unlikely to have occurred due to chance or random variation.