Which of the Following Statements Is Most Correct

question 62

Multiple Choice

Which of the following statements is most correct?

• A) The beta coefficient of a stock is normally found by running a regression of past returns on the stock against past returns on a stock market index. One could also construct a scatter diagram of returns on the stock versus those on the market, estimate the slope of the line of best fit, and use it as beta.
• B) It is theoretically possible for a stock to have a beta of 1.0. If a stock did have a beta of 1.0, then, at least in theory, its required rate of return would be equal to the riskless (default-free) rate of return, rRF.
• C) If you found a stock with a zero beta and held it as the only stock in your portfolio, you would by definition have a riskless portfolio. Your 1-stock portfolio would be even less risky if the stock had a negative beta.
• D) The beta of a portfolio of stocks is always larger than the betas of any of the individual stocks.
• E) All of the statements above are true.

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Definitions:

Social Responsibility

The obligation of an organization to act in ways that benefit society at large, beyond its own interests and legal requirements.

Positive Impact

A beneficial effect or outcome resulting from a particular course of action, often used in the context of social and environmental changes.

Negative Impact

Negative Impact refers to the adverse effects or harm that an action, policy, or event can have on individuals, communities, the environment, or the economy.

Self-Regulatory Programs

Initiatives voluntarily undertaken by industries or companies to monitor and regulate their own behavior according to established guidelines or standards.