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:

Venture Capitalists

Investors who provide capital to startup companies and small businesses with long-term growth potential in exchange for equity.

Financial Support

Monetary assistance provided to individuals or organizations to help cover costs or fund activities.

ESOP

Employee Stock Ownership Plan, a program that provides a company's workforce with an ownership interest in the company, usually in the form of stock shares.

Senior Debt Financing

A type of debt that has priority over other unsecured or otherwise more junior debt owed by the issuer in terms of repayment in the event of a sale or bankruptcy.