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:

Original Principal

The initial amount of money borrowed or invested, before any interest or profit is added.

Compounded Annually

Interest calculated on the initial principal and the accumulated interest from the past year added together once per year.

Term Deposit

A type of bank deposit that has a fixed term and typically offers a higher interest rate than a regular savings account.

Interest Rate

The percentage of a sum of money charged for its use.