Question 10

Which of the following statements is CORRECT?

		a. An investor can eliminate virtually all stand-alone 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. Once a portfolio has about 40 stocks, adding additional stocks will not reduce its risk by even a small amount.
		d. An investor can eliminate virtually all diversifiable risk if he or she holds a very large, well-diversified portfolio of stocks.
		e. 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.