Amanda talks with several different brokers at a social gathering.She hears the following advice from brokers A,B,and C.Which broker,if any,gave her incorrect advice?
A)There are risks in holding stocks, even in a highly diversified portfolio.
B)Portfolios with smaller standard deviations have lower risk.
C)Stocks with greater risks offer lower average returns.
D)They all gave her correct advice.

Question

Quizplus · Accepted Answer

Broker C gave incorrect advice. In reality, stocks with greater risks generally offer higher potential returns to compensate for the increased risk. This relationship is known as the risk-return tradeoff. Therefore, the statement that stocks with greater risks offer lower average returns is false. A, B and D all provided correct advice.

Amanda Talks with Several Different Brokers at a Social Gathering