John Has a Portfolio Consisting of Equal Proportions of 5

question 24

Multiple Choice

John has a portfolio consisting of equal proportions of 5 securities.Susan also has a portfolio of the same five securities but the weights of each security are not equal.Which of the statements below MUST be true?

• A)Because Susan has an unequal distribution of securities,her portfolio beta must be less than John's.
• B)Without additional information,we cannot be certain whose portfolio beta is greater.
• C)Because Susan has an unequal distribution of securities,her portfolio beta must be greater than John's.
• D)Because the portfolios contain the same securities,the beta of each portfolio must be the same.

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Definitions:

Takeover Bids

are proposals or offers made by an entity to acquire control of another company, typically by purchasing a majority of its stock.

Corporate Managers

Individuals who are in charge of directing and overseeing the operations and strategies of a corporation.

Stockholders

Individuals or entities that own shares in a corporation, thus holding a portion of its equity and potentially benefiting from its profits.

Principal-Agent Problem

A dilemma in which one party (the agent) is supposed to act in the best interest of another party (the principal) but may act in their own interest instead due to conflicts of interest.