In a Portfolio of Three Randomly Selected Stocks, Which of the Following

question 16

Multiple Choice

In a portfolio of three randomly selected stocks, which of the following could NOT be true; i.e., which statement is false?

• A) The standard deviation of the portfolio is greater than the standard deviation of one or two of the stocks.
• B) The beta of the portfolio is lower than the lowest of the three betas.
• C) The beta of the portfolio is equal to one of the three stock's betas.
• D) The beta of the portfolio is equal to 1.
• E) The standard deviation of the portfolio is less than the standard deviation of each of the stocks if they were held in isolation.

---

Definitions:

Origin Contract

A contractual agreement specifying the original terms and conditions set forth by the parties involved in a transaction or negotiation.

Risk of Loss

The potential that an investment's value may decrease or that a business may suffer losses.

Transit

The movement of people or goods from one location to another, which can involve multiple modes of transportation such as buses, trains, and ships.

Conditional Sales Contract

A sales agreement that grants possession of an asset to the buyer, but withholds legal ownership until all terms have been fulfilled, typically payment in full.