Assume That Two Investors Each Hold a Portfolio, and That

question 39

True/False

Assume that two investors each hold a portfolio, and that portfolio is their only asset. Investor A's portfolio has a beta of MINUS 2.0, while Investor B's portfolio has a beta of PLUS 2.0. Assuming that the unsystematic risks of the stocks in the two portfolios are the same, then the two investors face the same amount of risk. However, the holders of either portfolio could lower their risks, and by exactly the same amount, by adding some "normal" stocks with beta = 1.0.

---

Definitions:

Sensate Culture

Sorokin’s term for a society that interprets the social and physical world through the senses.

Spiritual Enlightenment

A state of heightened awareness and understanding, often associated with achieving a deep connection with the divine or the ultimate truth.

Exponential Growth

The adoption of a new technology or behaviour by the majority of the population.

Social Change

Transformations in the social structure and cultural values of a society over time, including shifts in norms, behaviors, and social institutions.