Which of the Following Portfolios Might Be Expected to Exhibit

question 6

Multiple Choice

Which of the following portfolios might be expected to exhibit less unique risk?

• A) Five random stocks; portfolio beta = .8
• B) Three random stocks; portfolio beta = 1.2
• C) Ten random stocks; portfolio beta = 1.0
• D) Twelve random stocks; portfolio beta unknown

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Definitions:

Income

Earnings garnered from employment or investing, often received periodically.

Budget Constraint

A line representing the combination of goods and services that a consumer can purchase with a given income.

Utility Function

A mathematical representation of how consumers derive satisfaction or utility from consuming goods and services.

Goods

Tangible products or items that satisfy human wants or needs.