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 the statements are correct.

Question

Quizplus · Accepted Answer

None of the statements are correct.

A) The dollar return is not a more useful measure to compare performance as it does not take into account the amount of capital deployed to generate that return. Therefore, percentage returns are more useful for performance comparison.
B) A dominant portfolio is one that has the highest expected return with the lowest possible risk. Having the highest risk with highest return would make it an aggressive portfolio, not a dominant portfolio.
C) Adding stocks to a portfolio can reduce unsystematic risk, but market risk cannot be fully eliminated as it is inherent in the market as a whole.

Which of the Following Statements Is Correct