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:

Voidable Contract

An agreement that may be annulled or declared void by one of the parties due to certain legal deficiencies or circumstances.

Rescinded

The act of revoking, canceling, or repealing a contract, decision, or agreement, making it as if it never existed.

Scienter

Deliberately or knowingly.

Duress

Any unlawful act or threat exercised on a person whereby the person is forced to enter into an agreement or to perform some other act against his or her will.