Which of the Following Statements Is Most Correct

question 3

Multiple Choice

Which of the following statements is most correct?

• A) The required return on a firm's ordinary shares is determined by the firm's systematic (or market) risk.If its systematic risk is known, and if it is expected to remain constant, the analyst has sufficient information to specify the firm's required return.
• B) A security's beta measures its non-diversifiable (systematic, or market) risk relative to that of most other securities.
• C) If the returns of two firms are negatively correlated, one of them must have a negative beta.
• D) A share's beta is less relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only one share.
• E) Statements b and c are both correct.

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