Which of the following is correct? Group of answer choices Risk-averse people will not hold stock. Diversification cannot reduce firm-specific risk. The larger the percentage of stock in a portfolio, the greater the risk, but the greater the average return. Stock prices are determined by fundamental analysis rather than by supply and demand.

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20-10-2020
Business

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Which of the following is correct? Group of answer choices Risk-averse people will not hold stock. Diversification cannot reduce firm-specific risk. The larger the percentage of stock in a portfolio, the greater the risk, but the greater the average return. Stock prices are determined by fundamental analysis rather than by supply and demand.

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Parrain Parrain · Answer 1 · 2020-10-20T16:32:05+02:00

Answer: The larger the percentage of stock in a portfolio, the greater the risk, but the greater the average return.

Explanation:

Stock in general is more risky than most financial instruments but this risk is accompanied with greater returns. This is why it is generally advisable to diversify stock in a portfolio.

As already mentioned, stock is risky but rewarding. It therefore follows that the more stock is in a portfolio, the risker the portfolio but the greater the average return.