Which One of the Following Statements Related to Risk Is

question 10

Multiple Choice

Which one of the following statements related to risk is correct?

• A) The beta of a portfolio must increase when a stock with a high standard deviation is added to the portfolio.
• B) Every portfolio that contains 25 or more securities is free of unsystematic risk.
• C) The systematic risk of a portfolio can be effectively lowered by adding T-bills to the portfolio.
• D) Adding five additional stocks to a diversified portfolio will lower the portfolio's beta.
• E) Stocks that move in tandem with the overall market have zero betas.

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Definitions:

FIFO

This inventory management and valuation method assumes that the oldest products are sold or used first; an acronym for "First In, First Out," detailing a specific approach to inventory and asset management.

Periodic Inventory System

An inventory accounting system where stock levels and cost of goods sold are calculated at the end of an accounting period, rather than being continuously updated.

Ending Inventory

The price of items for sale at the closing of a fiscal period.

Lower Of Cost

An accounting principle stating that inventory or other assets should be recorded at the lower of either the original cost or the current market value.