Which of the Following Statements Is CORRECT

question 6

Multiple Choice

Which of the following statements is CORRECT?

• A) The beta of a portfolio of stocks is always smaller than the betas of any of the individual stocks.
• B) If you found a stock with a zero historical beta and held it as the only stock in your portfolio,you would by definition have a riskless portfolio.
• C) The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns.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.However,this historical beta may differ from the beta that exists in the future.
• D) The beta of a portfolio of stocks is always larger than the betas of any of the individual stocks.
• E) 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 risk-free (default-free)rate of return,rRF.

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Definitions:

Consumer Spending

The total amount of money spent by households in an economy on goods and services.

Appreciation

An increase in the value of a currency in terms of other currencies.

Euro

The official currency used by 19 of the 27 European Union countries, also known as the eurozone.

Dollar

A currency unit used by the United States and other countries, represented by the symbol $, and used as a standard monetary unit in international transactions.