Question – True or false?
a. Investors prefer diversified companies because they are less risky.
b. If stocks were perfectly positively correlated, diversification would not reduce risk.
c. Diversification over a large number of assets completely eliminates risk.
d. Diversification works only when assets are uncorrelated.
e. A stock with a low standard deviation always contributes less to portfolio risk than a stock with a
higher standard deviation.
f. The contribution of a stock to the risk of a well-diversified portfolio depends on its market risk.
g. A well-diversified portfolio with a beta of 2.0 is twice as risky as the market portfolio.
h. An undiversified portfolio with a beta of 2.0 is less than twice as risky as the market portfolio.
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