Suppose That You Own $10,000 Worth of Stock in General

question 73

Multiple Choice

Suppose that you own $10,000 worth of stock in General Motors. Adding stock in which of the following companies would be least likely to reduce the risk in your portfolio?

• A)Google
• B)Wal-Mart
• C)Ford
• D)General Electric

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Definitions:

Hedge Portfolios

Investment strategies designed to reduce or mitigate risk in an investment portfolio by making counterbalancing investments, often involving derivatives.

Risk Factors

Elements or conditions that may potentially result in a negative impact on the performance or value of an investment.

APT

Stands for Arbitrage Pricing Theory, a financial model that determines asset prices based on the relationship between expected risk and expected return.

Conditional CAPM

An extension of the Capital Asset Pricing Model (CAPM) that allows for the beta coefficient to change depending on economic conditions or time.