Which of the Following Is Most Likely to Be True

question 68

Multiple Choice

Which of the following is most likely to be true for a portfolio of 40 randomly selected stocks?

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

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Definitions:

Incentive

A reward or benefit that motivates individuals or entities to act in a certain way.

Attendance Policy

A set of rules or guidelines regarding the presence of individuals at a place of employment, school, or other organizations, usually outlining consequences for absence.

Commissions

Fees or percentages earned by agents or companies for facilitating transactions or services.

Trade

The exchange of goods, services, or both between entities or regions.