If the Plotting of a Portfolio's Returns Against Returns on the Market

question 40

Multiple Choice

If the plotting of a portfolio's returns against returns on the market index produces a tight pattern, then:

• A)the portfolio appears to be well diversified.
• B)the portfolio has a Beta of 1.0.
• C)the portfolio has very little systematic risk.
• D)the portfolio has a very low market risk premium.

---

Definitions:

Correlation (r)

A statistical measure that indicates the extent to which two or more variables fluctuate together.

Graduate Research Project

An extensive study typically undertaken by a student at the graduate level, involving original research or a comprehensive review of existing research on a specific topic.

Randomly Selects

A process of choosing items or individuals without a specific pattern, order, or preference, ensuring equal chance of selection.

Longitudinal Study

A research design that involves repeated observations of the same variables (e.g., individuals) over short or long periods of time, often many years.