Which of the following statements is correct?
A) The dollar return is a more useful measure to compare performance because it more accurately reflects the change in wealth of the investor.
B) A dominant portfolio is one that has the highest risk and highest return within a set of portfolios.
C) By adding stocks to your portfolio, it is possible to effectively eliminate nearly all of the market risk.
D) None of these choices are correct.

Question

Quizplus · Accepted Answer

A dominant portfolio is defined as one that offers higher returns for a given level of risk or lower risk for a given level of return, not necessarily the highest risk and return. Dollar return does not account for the scale of investment and thus can be misleading when comparing performance across different investment sizes. Diversification can reduce unsystematic risk, but not all market risk can be eliminated.

Which of the Following Statements Is Correct