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

question 22

Multiple Choice

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

• 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 less than the betas of each of the individual stocks.
• D) The beta of the portfolio is greater than the beta of one or two of the individual stocks’ betas.
• E) The beta of the portfolio can not be equal to 1.

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Definitions:

Cause And Effect

A relationship where one event (the cause) makes another event happen (the effect), often used to describe phenomena in various fields of study.

Post Hoc, Ergo Propter Hoc

A logical fallacy that assumes a cause-and-effect relationship simply because one event followed another in time.

Fallacy Of Logic

An error in reasoning that renders an argument invalid, often undermining the argument's logical structure.

Inductive Reasoning

A method of reasoning in which specific observations or sets of observations are used to make general conclusions.