Which one of the following statements is correct concerning the standard deviation of a portfolio?
A)The greater the diversification of a portfolio,the greater the standard deviation of that portfolio.
B)The standard deviation of a portfolio can often be lowered by changing the weights of the securities in the portfolio.
C)Standard deviation is used to determine the amount of risk premium that should apply to a portfolio.
D)The standard deviation of a portfolio is equal to the geometric average standard deviation of the individual securities held within that portfolio.
E)The standard deviation of a portfolio is equal to a weighted average of the standard deviations of the individual securities held within the portfolio.

Question

Quizplus · Accepted Answer

The standard deviation of a portfolio, which measures the portfolio's risk, can often be reduced by adjusting the proportions of different assets within the portfolio. This is because diversification can lower the overall risk by combining assets with varying risk levels and correlations.

Which One of the Following Statements Is Correct Concerning the Standard