Which of the Following Statements Is CORRECT

question 92

Multiple Choice

Which of the following statements is CORRECT?

• A) If the returns on two stocks are perfectly positively correlated and these stocks have identical standard deviations,an equally weighted portfolio of the two stocks will have a standard deviation that is less than that of the individual stocks.
• B) A portfolio with a large number of randomly selected stocks would have more market risk than a single stock that has a beta of 0.5,assuming that the stock's beta was correctly calculated and is stable.
• C) If a stock has a negative beta,its expected return must be negative.
• D) A portfolio with a large number of randomly selected stocks would have less market risk than a single stock that has a beta of 0.5.
• E) According to the CAPM,stocks with higher standard deviations of returns must also have higher expected returns.

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Definitions:

Split-Brain Operation

A surgical procedure that separates the brain's two hemispheres by cutting the corpus callosum, often used to treat severe epilepsy.

Corpus Callosum

A large band of nerve fibers connecting the left and right hemispheres of the brain, facilitating communication and coordination between the two sides.

Hemisphere

One half of a spherical or roughly spherical object, often used to refer to one of the two halves of the brain.

Controls

In an experimental context, these are conditions that remain constant and unchanged to ensure that the experimental results are due to the variables being tested.