The graph shows the relationship between risk, measured as the standard deviation of a stock portfolio's return, and the number of different stocks in the portfolio for a hypothetical stock market.

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Question

Each of the following portfolios contains four of the stock picks. Which portfolio is the least diversified? Pherk, Airing, G

6. Diversification and risk

The graph shows the relationship between risk, measured as the standard deviation of a stock portfolio's return, and the number of different stocks in the portfolio for a hypothetical stock market.

True or False: Increasing the number of stocks in a portfolio reduces market risk.

True

False

Consider two stock portfolios. Portfolio A consists of four different stocks from firms in different industries. Portfolio B consists of 10 different stocks, also from firms in different industries. The return on Portfolio A is likely to be volatile than that of Portfolio B.

Suppose a stock analyst recommends buying stock in the following companies:

Each of the following portfolios contains four of the stock picks. Which portfolio is the least diversified?

Pherk, Airing, Goohoo, Shexxon
Toyonda, Saalvo, GMW, Honsubishi
Boebus, Airing, Shexxon, Mobron
Toyonda, Honsubishi, Boebus, Airing

business economics

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Answer 1

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Answer #1

(1) False

More stocks in a portfolio decreases non-systematic) risk. But it doesn't decrease market risk.

(2) Return on portfolio A likely to be more volatile (the lower the number of stocks, the higher the volatility of returns).

(3) Least diversified portfolio: Toyonda, Saalvo, GMW, Honsubishi (each of the stocks are from automobile industry only)

> THANK YOU this is actually right omg

Bratayley Musical.ly! Sun, Apr 3, 2022 11:09 AM

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Answer 2

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The graph shows the relationship between risk, measured as the standard deviation of a stock portfolio's return, and the number of different stocks in the portfolio for a hypothetical stock market.

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