For a Portfolio of 40 Randomly Selected Stocks,which of the Following

question 124

Multiple Choice

For a portfolio of 40 randomly selected stocks,which of the following is most likely to be true?

• A)The riskiness of the portfolio is greater than the riskiness of each of the stocks if each was held in isolation.
• B)The riskiness of the portfolio is the same as the riskiness of each of the stocks if each was held in isolation.
• C)The beta of the portfolio is less than the average of the betas of the individual stocks.
• D)The beta of the portfolio is equal to the average of the betas of the individual stocks.

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Definitions:

Assets

Resources owned by a company or individual that have economic value and can provide future benefits.

Expense Recognition Principle

An accounting principle that directs the recognition of expenses in the same period as the related revenues.

Actual Cost

The actual expense incurred to acquire an asset or the expense incurred to produce goods or services, as opposed to budgeted or estimated costs.

Full Disclosure Principle

A financial reporting guideline requiring companies to disclose all relevant and necessary information in their financial statements and footnotes to help users make well-informed decisions.