Which of the Following Statements Is CORRECTσ

question 146

Multiple Choice

Which of the following statements is CORRECTσ

• A) 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.
• B) if a stock has a negative beta, its expected return must be negative.
• C) 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.
• D) according to the capm, stocks with higher standard deviations of returns must also have higher expected returns.
• E) if the returns on two stocks are perfectly positively correlated (i.e., the correlation coefficient is +1.0) 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.

---

Definitions:

Aggregate Supply

The total supply of goods and services available to a particular market from producers at different price levels in a given period.

Aggregate Demand

The total requisition of goods and services in an economic setting, valued at a consistent price level and for a particular duration.

Full-Employment Equilibrium

A scenario where all accessible labor resources are utilized in the most economically effective manner.

Aggregate Supply (AS) Curve

A graphical representation in economics that shows the total supply of goods and services that firms in an economy are willing to produce at a given price level in a given period.