Amy Has a Portfolio with a Beta of 1

question 20

Multiple Choice

Amy has a portfolio with a beta of 1.26.She has decided to lower her investment risk.Adding which one of the following securities to her portfolio is most assuredly going to lower the risk of the portfolio?

• A)A stock that has a covariance with the market of .89
• B)A security that has a standard deviation of 11 percent
• C)A security with a beta of 1.58
• D)U.S.Treasury bills
• E)A mix of small-company and large-company stocks

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.