Which of the Following Statements Is CORRECT

question 92

Multiple Choice

Which of the following statements is CORRECT?

• A) A portfolio with a large number of randomly selected stocks would have more market risk than a single stock that has a beta of 0.5, assuming that the stock's beta was correctly calculated and is stable.
• B) If a stock has a negative beta, its expected return must be negative.
• C) A portfolio with a large number of randomly selected stocks would have less market risk than a single stock that has a beta of 0.5.
• D) According to the CAPM, stocks with higher standard deviations of returns must also have higher expected returns.
• E) If the returns on two stocks are perfectly positively correlated (i.e., the correlation coefficient is +1.0) and these stocks have identical standard deviations, an equally weighted portfolio of the two stocks will have a standard deviation that is less than that of the individual stocks.

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Definitions:

Responsibility Centers

Entities within an organization responsible for controlling revenue and expenses, influencing the operational and financial results.

Cost Centers

Parts of an organization where costs can be identified and directly attributed, but which do not directly generate revenue.

Profit Centers

Parts of an organization that directly contribute to its profit through their operations and are responsible for their own revenues and costs.

Decentralized Operations

A management structure where decision-making and operations are distributed among various autonomous units or departments within an organization.