In a Portfolio of Three Randomly Selected Stocks, Which of the Following

question 16

Multiple Choice

In a portfolio of three randomly selected stocks, which of the following could NOT be true; i.e., which statement is false?

• A) The standard deviation of the portfolio is greater than the standard deviation of one or two of the stocks.
• B) The beta of the portfolio is lower than the lowest of the three betas.
• C) The beta of the portfolio is equal to one of the three stock's betas.
• D) The beta of the portfolio is equal to 1.
• E) The standard deviation of the portfolio is less than the standard deviation of each of the stocks if they were held in isolation.

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Definitions:

Tractors

Heavy-duty vehicles designed primarily for farming tasks, including plowing, tilling, and planting fields.

Motorcycles

Two-wheeled vehicles powered by an engine, offering a form of transportation or recreation for riders.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than others.

Trade

Trade involves the exchange of goods or services between parties, which can be within a country or between countries.