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Risk & Variance

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1. As the number of stocks in a portfolio is increased:

A. Unique risk decreases and approaches to zero
B. Market risk decreases
C. Unique risk decreases and becomes equal to market risk
D. Total risk approaches to zero

2. A statistical measure of the degree to which securities' returns move together is called:

A. Variance
B. Correlation Coefficient
C. Standard Deviation
D. None of the above

3. When computing the expected return on a portfolio of stocks the portfolio weights are based on the:

A. number of shares owned in each stock.
B. price per share of each stock.
C. market value of the total shares held in each stock.
D. original amount invested in each stock.
E. cost per share of each stock held.

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Solution Summary

This solution helps with a problem involving risk and variance.

Solution provided by:
Jayant Kumar, MBA
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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