Which of the following statements is CORRECT?
A. An investor can eliminate virtually all market risk if he or she holds a very large and well diversified portfolio of stocks.
B. The higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio.
C. It is impossible to have a situation where the market risk of a single stock is less than that of a portfolio that includes the stock.
D. Once a portfolio has about 40 stocks, adding additional stocks will not reduce its risk by even a small amount.
E. An investor can eliminate virtually all diversifiable risk if he or she holds a very large, well-diversified portfolio of stocks.
Answer: E
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a. 8.7 days. b. 182.5 days. c. 304.0 days. d. 439.8 days.
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