Which of the following statements is CORRECT An investor can

Which of the following statements is CORRECT? An investor can eliminate virtually all market risk if he or she holds a very large and well-diversified portfolio of stocks. 1) 2) An underpriced security will plot above the security market line. The higher the correlation between the stocks in a portfolio, the lower the risk inherent in the portfolio 4 The capital asset pricing model is based on the market risk premium, standard deviation and the risk-free rate

Solution

1) An investor can eliminate virtually all diversifiable risk if he or she holds a very large, well-diversified portfolio of stocks.

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