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:

Statutory Authority

Legal powers granted to an entity or individual by a statute, enabling them to enact or enforce laws.

Revocation

The action of withdrawing, cancelling, or annulling something previously granted, such as a right, license, or contract.

Captured Agency

A situation where a regulatory agency is dominated by the interests of the industry it is supposed to regulate.

Agency Officials

Individuals who hold positions of authority within governmental or organizational bodies, responsible for implementing policies and making decisions.