Which One of the Following Statements Related to Risk Is

question 10

Multiple Choice

Which one of the following statements related to risk is correct?

• A) The beta of a portfolio must increase when a stock with a high standard deviation is added to the portfolio.
• B) Every portfolio that contains 25 or more securities is free of unsystematic risk.
• C) The systematic risk of a portfolio can be effectively lowered by adding T-bills to the portfolio.
• D) Adding five additional stocks to a diversified portfolio will lower the portfolio's beta.
• E) Stocks that move in tandem with the overall market have zero betas.

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Definitions:

Sale-Or-Return Contract

A contract in which the buyer and seller agree that the buyer may return the goods at a later time.

Voidable Title

Title that occurs in situations in which the contract between the original parties would be void, but the goods have already been sold to a third party.

Common Law

The body of law developed from judicial decisions and customs, as opposed to statutes.

Common-Carrier Delivery

The transportation or delivery of goods or people by a service offered to the public under license or authority provided by a regulatory body.