Which of the following statements is CORRECT? A stock's standard deviations is more relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only that one stock. O An investor can't eliminate all market risk even if he or she holds a very large and even well diversified portfolio of stocks. According to the CAPM, stocks with higher standard deviations will have higher expected returns. If an investor buys enough stocks, he or she can, through diversification, eliminate all of the diversifiable risk inherent in owning stocks. Therefore, if a portfolio contained all publicly traded stocks it would be essentially riskless.
Which of the following statements is CORRECT? A stock's standard deviations is more relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only that one stock. O An investor can't eliminate all market risk even if he or she holds a very large and even well diversified portfolio of stocks. According to the CAPM, stocks with higher standard deviations will have higher expected returns. If an investor buys enough stocks, he or she can, through diversification, eliminate all of the diversifiable risk inherent in owning stocks. Therefore, if a portfolio contained all publicly traded stocks it would be essentially riskless.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Please answer in 10 minute just need final answer not explanation
Transcribed Image Text:Which of the following statements is CORRECT?
A stock's standard deviations is more relevant as a measure of risk to an investor
with a well-diversified portfolio than to an investor who holds only that one
stock.
O An investor can't eliminate all market risk even if he or she holds a very large and
even
well diversified portfolio of stocks.
According to the CAPM, stocks with higher standard deviations will have higher
expected returns.
If an investor buys enough stocks, he or she can, through diversification,
eliminate all of the diversifiable risk inherent in owning stocks. Therefore, if a
portfolio contained all publicly traded stocks it would be essentially riskless.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education