In a Portfolio of Three Randomly Selected Stocks, Which of the Following

question 11

Multiple Choice

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

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

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Definitions:

Early Success

Achieving significant positive outcomes or milestones at an initial or early stage in a process or endeavor.

Cross-functional Teams

Teams composed of members from different departments or areas within an organization, working together on a common project or goal.

Communication Barriers

Obstacles that hinder the transfer and understanding of information between individuals or groups.

Functional Diversity

Variety within a group or organization achieved through including members with different skills, expertise, and perspectives to enhance performance and innovation.