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Question
Which of the following statements is CORRECT?
a. The higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio.
b. An investor can eliminate almost all risk if he or she holds a very large and well diversified portfolio of stocks.
c. Once a portfolio has about 40 stocks, adding additional stocks will not reduce its risk by even a small amount.
d. An investor can eliminate almost all diversifiable risk if he or she holds a very large, well-diversified portfolio of stocks.
e. An investor can eliminate almost all market risk if he or she holds a very large and well diversified portfolio of stocks.
Answer
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