Which of the following statements is correct?
A)The dollar return is a more useful measure to compare performance because it more accurately reflects the change in wealth of the investor.
B)A dominant portfolio is one that has the highest risk and highest return within a set of portfolios.
C)By adding stocks to your portfolio, it is possible to effectively eliminate nearly all of the market risk.
D)None of these statements is correct.

Question

Quizplus · Accepted Answer

None of the statements are correct.

A) The dollar return does not necessarily reflect the change in wealth of the investor because it does not take into account factors such as inflation or the amount of money invested. 
B) A dominant portfolio is one that has the highest return for a given level of risk, not necessarily the highest risk and highest return. 
C) Adding stocks to a portfolio can reduce some market risk but not eliminate it completely. Diversification can help reduce risk but cannot completely eliminate it.

Which of the Following Statements Is Correct