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:

Minimum Wage Laws

Legislation that sets the lowest hourly wage rate that employers can legally pay their workers, intended to protect workers from exploitation.

Equilibrium Wage

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded, often considered the market-clearing wage.

Illegal Immigrants

Individuals who enter or reside in a country without the legal permission or in violation of the immigration laws of that country.

Minimum Wage Laws

Legislation that sets the lowest hourly rate of pay that employers can legally pay their workers, intended to protect employees from unduly low pay.