Which of the Following Statements Is CORRECT

question 128

Multiple Choice

Which of the following statements is CORRECT?

• A) If you found a stock with a zero historical beta and held it as the only stock in your portfolio, you would by definition have a riskless portfolio.
• B) The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns.One could also construct a scatter diagram of returns on the stock versus those on the market, estimate the slope of the line of best fit, and use it as beta.However, this historical beta may differ from the beta that exists in the future.
• C) The beta of a portfolio of stocks is always larger than the betas of any of the individual stocks.
• D) It is theoretically possible for a stock to have a beta of 1.0.If a stock did have a beta of 1.0, then, at least in theory, its required rate of return would be equal to the risk-free (default-free)rate of return, rRF.
• E) The beta of a portfolio of stocks is always smaller than the betas of any of the individual stocks.

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Definitions:

Woodrow Wilson

The 28th President of the United States (1913-1921), known for his leadership during World War I, the creation of the League of Nations, and his advocacy for democracy and peace.

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The parties or nations engaged in a conflict or war, often characterized by mutual hostility and aggression.

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Industry sector including banking, investment, and insurance services designed to manage money.