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Homework answers / question archive / Which two of the following five statements are correct? Select two alternatives: A risk-averse investor will avoid investing in stocks

Which two of the following five statements are correct? Select two alternatives: A risk-averse investor will avoid investing in stocks

Finance

Which two of the following five statements are correct?

Select two alternatives:

  • A risk-averse investor will avoid investing in stocks.
  • Diversification eliminates systematic risk but not idiosyncratic risk.
  • The 95% confidence interval for the expected return is defined as the Historical Average Return plus or minus three standard errors.
  • While there is no clear relationship between risk and return for individual stocks, on average smaller stocks have both higher risk and returns compared to larger stocks.
  • The realized return is the total return we earn from dividends and capital gains, expressed as a percentage of the initial stock price.

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