Which of the following statements is CORRECT regarding risk and return? Group of answer choices: A stock's market risk is more relevant to an investor with a well-diversified portfolio than to an investor who holds only that one stock. 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. The higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio. An investor can eliminate virtually all market risk if he or she holds a very large and well diversified portfolio of stocks. Once a portfolio has about 40 stocks, adding additional stocks will not reduce its risk by even a small amount.
Which of the following statements is CORRECT regarding risk and return? Group of answer choices: A stock's market risk is more relevant to an investor with a well-diversified portfolio than to an investor who holds only that one stock. 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. The higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio. An investor can eliminate virtually all market risk if he or she holds a very large and well diversified portfolio of stocks. Once a portfolio has about 40 stocks, adding additional stocks will not reduce its risk by even a small amount.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 24P
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Which of the following statements is CORRECT regarding risk and return?
Group of answer choices:
A stock's market risk is more relevant to an investor with a well-diversified portfolio than to an investor who holds only that one stock.
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.
The higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio.
An investor can eliminate virtually all market risk if he or she holds a very large and well diversified portfolio of stocks.
Once a portfolio has about 40 stocks, adding additional stocks will not reduce its risk by even a small amount.
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