Which of the following statements is false?
A) Diversification cannot eliminate risk that is inherent in the macro economy or market risk.
B) The expected rate of return on a portfolio depends on the correlation between the return on each stock.
C) Although gold is a risky investment by itself, including gold in a stock portfolio may reduce total risk of the portfolio.
D) Using the concept of correlation in a portfolio can reduce risk.

Question

Quizplus · Accepted Answer

The expected rate of return on a portfolio depends not only on the correlation between the return on each stock but also on the weight of each stock in the portfolio and the expected return on each stock. Therefore, statement B is false. Statements A, C, and D are all true.

Which of the Following Statements Is False