Multiple Choice
Which of the following statements is CORRECT?
A) An investor can eliminate virtually all market risk if he or she holds a 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) Once a portfolio has about 40 stocks, adding additional stocks will not reduce its risk by even a small amount.
E) An investor can eliminate virtually all diversifiable risk if he or she holds a large, well diversified portfolio of stocks.
Correct Answer:
Verified
Correct Answer:
Verified
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