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.

---

Definitions:

Profits

The financial gain obtained when the revenue earned from business activities exceeds the expenses, costs, and taxes needed to sustain the activities.

Assets

Resources owned by a business or individual that have economic value or potential to provide future benefits.

Liabilities

Financial obligations or debts that an individual or company owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Retail Establishment

A business location that sells products or services directly to consumers for personal or household consumption.