A Portfolio of Three Randomly Selected Stocks, Which of the Following

question 107

Multiple Choice

a portfolio of three randomly selected stocks, which of the following could NOT be true; i.e., which statement is false?

• A) The riskiness of the portfolio is greater than the riskiness of one or two of the stocks.
• B) The beta of the portfolio is lower than the lowest of the three betas.
• C) The beta of the portfolio is higher than the highest of the three betas.
• D) None of the above statements is obviously false, because they all could be true, but not necessarily at the same time.
• E) The riskiness of the portfolio is less than the riskiness of each of the stocks if they were held in isolation.

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Definitions:

Oral Contract

An agreement between parties that is made verbally instead of being documented in writing.

Admission

A statement made in court, under oath, or at some stage during a legal proceeding in which a party against whom charges have been brought admits that an oral contract existed, even though the contract was required to be in writing.

Equal Dignity Rule

A legal principle requiring that agents’ actions and contracts signed on behalf of a principal must be in writing if the principal's contract is also required to be in writing.

Statute of Frauds

A legal principle requiring certain types of contracts to be in writing and signed by the party to be charged, in order to be enforceable.