Asked by Landrie Pierce on May 02, 2024
Verified
In a highly diversified portfolio, the standard deviation of the portfolio will be equal to:
A) Zero.
B) One.
C) The portfolio beta.
D) The systematic risk.
E) The risk premium of the portfolio.
Systematic Risk
The inherent risk of exposure to market changes that cannot be diversified away, affecting all securities in a similar manner.
Portfolio Beta
An evaluation of a portfolio's systemic risk in relation to the entire market's volatility.
- Acquire knowledge about the distinctions between diversified and non-diversified risks in managing portfolios.
- Acquire knowledge on the role of beta in assessing the systematic risk associated with portfolios.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
D
Explanation :
The standard deviation of a highly diversified portfolio reflects the systematic risk, as diversification eliminates unsystematic risk.
Learning Objectives
- Acquire knowledge about the distinctions between diversified and non-diversified risks in managing portfolios.
- Acquire knowledge on the role of beta in assessing the systematic risk associated with portfolios.