23. Which of the following statements is CORRECT? a. A stock with an above-avera
ID: 2652555 • Letter: 2
Question
23.
Which of the following statements is CORRECT?
a. A stock with an above-average standard deviation must also have an above-average beta. b. A two-stock portfolio will always have a lower standard deviation than a one-stock portfolio. c. A two-stock portfolio will always have a lower beta than a one-stock portfolio. d. A portfolio that consists of 40 stocks that are not highly correlated with "the market" will probably be less risky than a portfolio of 40 stocks that are highly correlated with the market, assuming the stocks all have the same standard deviations. e. If portfolios are formed by randomly selecting stocks, a 10-stock portfolio will always have a lower beta than a one-stock portfolioExplanation / Answer
(d) Statement is correct - A portfolio that consist 40 stocks that are not highly colrelated with "the market" will be less risky as it will be having less affect on the portfolio because of market sentiments volatility.
Other statements are incorrect.
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