Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Please answer in 10 minute just need final answer not explanation
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.
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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.
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