A stock that is risky on a stand-alone basis:
A)is just as risky in a portfolio.
B)is one that just about never produces a return that's higher than expected.
C)is likely to produce a return that is substantially different from its mean or expected return.
D)will have no effect on a portfolio's risk if it is added carefully.

Question

Quizplus · Accepted Answer

A stock that is risky on a stand-alone basis is likely to produce a return that is substantially different from its mean or expected return. This means that it has a higher volatility and uncertainty. In a portfolio, the effect of this risk may be reduced based on the diversification of the portfolio. However, it is still important to consider the risk of individual stocks when constructing a portfolio.

A Stock That Is Risky on a Stand-Alone Basis