Which One of the Following Statements Related to Risk Is

question 10

Multiple Choice

Which one of the following statements related to risk is correct?

• A) The beta of a portfolio must increase when a stock with a high standard deviation is added to the portfolio.
• B) Every portfolio that contains 25 or more securities is free of unsystematic risk.
• C) The systematic risk of a portfolio can be effectively lowered by adding T-bills to the portfolio.
• D) Adding five additional stocks to a diversified portfolio will lower the portfolio's beta.
• E) Stocks that move in tandem with the overall market have zero betas.

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Definitions:

Buffer

Substance or group of substances that tend to resist pH changes of a solution, thus stabilizing its relative acidity and basicity.

Inorganic

Refers to compounds that generally do not contain carbon-hydrogen bonds, often associated with minerals and non-living matter.

Molecule

The smallest particle in a chemical element or compound that has the chemical properties of that element or compound.

CH4

Methane, a colorless, odorless flammable gas that is the simplest alkane and a main component of natural gas.