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Jane has a portfolio of 3 average stocks, and Dick has a portfolio of 30 average stocks. Assuming ...

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Jane has a portfolio of 3 average stocks, and Dick has a portfolio of 30 average stocks. Assuming ...

Jane has a portfolio of 3 average stocks, and Dick has a portfolio of 30 average stocks. Assuming the market is in equilibrium, which of the following statements is correct?

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Jane’s portfolio will havemorediversifiable risk and also more market risk than Dick’s portfolio.

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The required return on Jane’s portfolio will be higher than that on Dick’s portfolio because Jane’s portfolio will have more total risk.

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If the two portfolios have the same beta, their required returns will be the same, but Jane’s portfolio will have more market risk than Dick’s.

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Dick’s portfolio will have less diversifiable risk, the same market risk, and thus less total risk than Jane’s portfolio, but the required (and expected) returns will be the same on both portfolios.

Textbook

Financial Management: Theory and Practice

Edition: 4^th

Authors: Brigham, Ehrhardt, Gessaroli, Nason

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This helped my grade so much Perfect

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