Which of the Following Statements Is True About the Beta

question 34

Multiple Choice

Which of the following statements is true about the beta of a portfolio?

• A)If the beta of a portfolio doubles, its required return also doubles.
• B)If a stock included in the portfolio has a negative beta, the portfolio's required return is negative.
• C)Portfolios that contain higher beta stocks have more company-specific risk, but do not necessarily have more market risk.
• D)If a portfolio's beta increases from 1.2 to 1.5, its actual rate of return will decrease by 1.5 times the market risk premium.
• E)If the beta of a stock is three, the stock's relevant risk is three times as volatile as the market portfolio.

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Definitions:

Bailor

One who entrusts goods to a bailee.

Bailee

A person or entity that has temporary possession of personal property belonging to another under a bailment agreement.

Voluntary Delivery

The deliberate and willing transfer of possession of an item from one party to another without coercion.

Common Carriers

Entities that provide transportation services to the general public for a fee.