Which of the Following Statements Is CORRECT

question 103

Multiple Choice

Which of the following statements is CORRECT?

• A)The beta of a portfolio of stocks is always smaller than the betas of any of the individual stocks.
• B)If you found a stock with a zero historical beta and held it as the only stock in your portfolio, you would by definition have a riskless portfolio.
• C)The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns. One could also construct a scatter diagram of returns on the stock versus those on the market, estimate the slope of the line of best fit, and use it as beta. However, this historical beta may differ from the beta that exists in the future.
• D)The beta of a portfolio of stocks is always larger than the betas of any of the individual stocks.
• E)It is theoretically possible for a stock to have a beta of 1.0. If a stock did have a beta of 1.0, then, at least in theory, its required rate of return would be equal to the risk-free (default-free) rate of return, r_RF.

---

Definitions:

Government Institutions

Entities created by a government to perform functions and duties in various sectors of society, including education, defense, welfare, and regulation.

Microsystem

In ecological systems theory, the immediate environment with which an individual directly interacts, such as family, school, or workplace.

Ecological Approach

A method or perspective that emphasizes the interaction between organisms and their physical and biological environments.

Parent-Child Interactions

The dynamic and reciprocal relationships and exchanges that occur between parents and their children.