Which of the Following Is Most Likely to Be True

question 101

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.

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Definitions:

Growth Capital

Capital invested in a company to accelerate its growth without significantly changing its control structure, usually in the form of equity investment.

Equity Preservation

Strategies or measures taken to maintain or protect the value of an investor's ownership stake in a company.

Venture Capitalist

An investor who provides capital to startup companies and small businesses with perceived long-term growth potential in exchange for equity, or ownership stake.

Potential Venture

A business idea or project that has the possibility of being developed into a successful commercial enterprise.