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

question 2

Multiple Choice

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

• 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 less than the betas of each of the individual stocks.
• C) The beta of the portfolio is greater than the beta of one or two of the individual stocks' betas.
• D) The beta of the portfolio cannot be equal to 1.
• 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:

Fixed Asset

Long-term tangible property or equipment that a firm owns and uses in its operations to generate income.

Liquidity

The convenience with which one can convert an asset into cash without influencing its market price.

Financial Distress

A situation in which a company struggles to meet or has difficulty paying off its financial obligations to creditors.

Liquid Assets

Assets that can be quickly and easily converted into cash without significant loss of value.