If a stock portfolio is well diversified, then the portfolio varianceA. will equal the variance of the most volatile stock in th

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If a stock portfolio is well diversified, then the portfolio varianceA. will equal the variance of the most volatile stock in th

e portfolio. B. may be less than the variance of the least risky stock in the portfolio. C. must be equal to or greater than the variance of the least risky stock in the portfolio. D. will be a weighted average of the variances of the individual securities in the portfolio.

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1 answer:

mihalych1998 [28] · Answer 1 · 2022-01-24T08:56:24+03:00

Answer: The correct answer is "B. may be less than the variance of the least risky stock in the portfolio.".

Explanation: If a stock portfolio is well diversified, then the portfolio variance may be less than the variance of the least risky stock in the portfolio.

This occurs because diversifying the risk results in a lower risk in the total portfolio.