Which of the Following Statements Is Most Correct

question 56

Multiple Choice

Which of the following statements is most correct?

• A) A portfolio with a beta of minus 2 has the same degree of risk to its holder,relative to the market,as a portfolio with a beta of plus 2.However,the holder of either portfolio could lower his or her risk exposure by buying some "normal" stocks.
• B) A stock with a beta of −1.0 has zero systematic (or market)risk.
• C) It is possible for a stock to have a positive beta even in situations where the correlation between the returns on it and those on another stock are negative.
• D) Diversifiable risk,which is measured by beta,can be lowered by adding more stocks to a portfolio.
• E) Statements a and c are both correct.

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Definitions:

Variable Cost

Financial obligations that shift depending on production or sales levels, notably materials and workforce expenses.

Fixed Cost

Costs that do not vary with the level of production or sales.

Period Cost

Expenses not directly tied to production activity, such as administrative and selling expenses, that are expensed in the accounting period in which they are incurred.

Contribution Margin Ratio

A metric that shows the percentage of sales revenue left after variable costs are deducted, indicating how much contributes to fixed costs and profits.