Which of the Following Statements Is Most Correct

question 23

Multiple Choice

Which of the following statements is most correct?

• A)If beta doubles, the required return doubles.
• B)If a stock has a negative beta, its required return is negative.
• C)Higher beta stocks have more company-specific risk, but do not necessarily have more market risk.
• D)If a portfolio's beta increases from 1.2 to 1.5, its required rate of return will increase by an amount equal to its market risk premium.
• E)If two stocks have the same standard deviation and the correlation coefficient between the returns of two stocks equals zero, an equally weighted portfolio of the two stocks will have a standard deviation lower than that of individual stocks.

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Definitions:

Long-term Investors

Individuals or entities that purchase assets with the intention of holding them for an extended period, typically expecting to benefit from long-term growth.

Underwriting Syndicate

A group of financial institutions that work together to issue and distribute a new security to the public.

IPO

Initial Public Offering, the process by which a private company becomes publicly traded by offering its shares for the first time to the public.

Venture Capitalists

Investors who provide capital to start-up companies and small businesses with perceived long-term growth potential, often taking a stake in the company in exchange.