Question: Which of the following statements is most correct?
a. It is possible to have a situation where the market risk of a single stock is less than the market risk of a portfolio of stocks.
b. The market risk premium will increase if, on average, market participants become more risk averse.
c. If you selected a group of stocks whose return is perfectly positively correlated, then you could end up with a portfolio for which none of the unsymmetric risk is diversified away.
d. Statements a and b are correct.
e. All of the statements above are correct.