Which of the Following Statements Is CORRECT

question 92

Multiple Choice

Which of the following statements is CORRECT?

• A) If the returns on two stocks are perfectly positively correlated and these stocks have identical standard deviations,an equally weighted portfolio of the two stocks will have a standard deviation that is less than that of the individual stocks.
• B) A portfolio with a large number of randomly selected stocks would have more market risk than a single stock that has a beta of 0.5,assuming that the stock's beta was correctly calculated and is stable.
• C) If a stock has a negative beta,its expected return must be negative.
• D) A portfolio with a large number of randomly selected stocks would have less market risk than a single stock that has a beta of 0.5.
• E) According to the CAPM,stocks with higher standard deviations of returns must also have higher expected returns.

---

Definitions:

Strategic Planning Process

A systematic approach used by organizations to define their strategy, direction, and decision-making on resource allocation to pursue their goals.

Establishment

The act of setting up a business or organization; also refers to the business or institution itself once set up.

Control Systems

A set of devices or methods that manage, command, direct, or regulate the behavior of other devices or systems.

Code Of Ethics

A set of principles designed to help professionals conduct their business with honesty, integrity, and fairness.