PORTFOLIO RISK 50 40 40, 28 30 20 10 0 0 10 20 30 40 50 60 70 80 90 100 NUMBER OF STOCK IN THE PORTFOLIO Based on the data presented in the previous graph, which of the following statements are true? Check all that apply. A portfolio of 40 stocks has a diversifiable risk of 8%. A portfolio of 80 or more stocks could eliminate almost half of the risk. The market portfolio would have a standard deviation of about 40%.

          PORTFOLIO RISK
50
40
40, 28
30
20
10
0
0 10 20 30 40 50 60 70 80 90 100
NUMBER OF STOCK IN THE PORTFOLIO
Based on the data presented in the previous graph, which of the following statements are true? Check all that apply.
A portfolio of 40 stocks has a diversifiable risk of 8%.
A portfolio of 80 or more stocks could eliminate almost half of the risk.
The market portfolio would have a standard deviation of about 40%.

PORTFOLIO RISK
50
40
40, 28
30
20
10
0
0 10 20 30 40 50 60 70 80 90 100
NUMBER OF STOCK IN THE PORTFOLIO
Based on the data presented in the previous graph, which of the following statements are true? Check all that apply.
A portfolio of 40 stocks has a diversifiable risk of 8%.
A portfolio of 80 or more stocks could eliminate almost half of the risk.
The market portfolio would have a standard deviation of about 40%.

Added by Xavier D.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Madhur L

11/17/2023

Step 1

In this case, the portfolio of 40 stocks has a diversifiable risk of 8%, meaning that by holding 40 stocks, the portfolio is diversified enough to reduce its risk by 8%. Show more…

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A portfolio of 40 stocks has a diversifiable risk of 8%. A portfolio of 80 or more stocks could eliminate almost half of the risk. The market portfolio would have a standard deviation of about 40%. As the portfolio's size increases, its market risk decreases.