In a Portfolio of Three Different Stocks, Which of the Following

question 14

Multiple Choice

In a portfolio of three different stocks, which of the following could NOT be true?

• A) The riskiness of the portfolio is less than the riskiness of each of the stocks if they were held in isolation.
• B) The riskiness of the portfolio is greater than the riskiness of one or two of the stocks.
• C) The beta of the portfolio is less than the betas of each of the individual stocks.
• D) The beta of the portfolio is greater than the beta of one or two of the individual stocks' betas.
• E) None of the above (i.e., they all could be true, but not necessarily at the same time).

---

Definitions:

Output Units

Quantitative measures of production, representing the number of units of goods or services produced.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale.

Long-run Average Total Cost

The average cost per unit of output in the long run, where all inputs are considered variable and firms can adjust all factors of production.

Managerial Bureaucracy

A type of organizational structure that is characterized by a formal division of responsibilities, a clear hierarchy, and a detailed set of rules and procedures.