Question

Which of the following Statements is most accurate?

The greater the number of stocks in a stock portfolio, the harder it would be to outperform a market index like the S&P 500

The greater the number of stocks in a stock portfolio, the higher the beta of the portfolio The greater the number of stocks in a stock portfolio, the lower the portfolio's systematic risk The beta of a sock portfolio will increase any time that one or more of the stocks in the portfolio goes through a stock split |

Answer #1

The Beta of a portfolio is the weighted average of the betas | |||||||||||

of the individual stocks in the portfolio. | |||||||||||

Therefore, the beta of the portfolio depends on the beta of each individual stock's | |||||||||||

beta and the portfolio weight of the stock. The portfolio beta does not not depend | |||||||||||

on the number of stocks in the portfolio. | |||||||||||

Systematic risk is undiversifiable risk. Systematic risk is the risk | |||||||||||

that is associated with events that affect the entire market and not | |||||||||||

just an individual stock or individual industry. | |||||||||||

The systematic risk of a portfolio does not depend on the number of | |||||||||||

stocks in a portfolio because it affects the entire market. | |||||||||||

A stock split will not affect the Beta of a portfolio because the Beta of the | |||||||||||

portfolio is the weighted average of the betas of the individual stocks in the | |||||||||||

portfolio. | |||||||||||

The following statement is most accurate: | |||||||||||

The greater the number of stocks in a stock portfolio, the harder it would be to outperform a market index like the S&P 500. |

QUESTION 17
Which of the following statements is most correct?
a. An increase in expected inflation could be expected to
increase the required return on a riskless asset and on an average
stock by the same amount, other things held constant.
b. A graph of the SML would show required rates of return on the
vertical axis and standard deviations of returns on the horizontal
axis.
c. If two "normal" or "typical" stocks were combined to form a
2-stock portfolio,...

which of the following statements is true about diversification
and risk?
With higher number of assets, the company specific risk
approaches zero and total
portfolio risk falls to the systematic risk (market risk)
With higher number of assets, the company specific risk
approaches the systematic risk
(market risk)
With higher number of assets, the total portfolio risk increases
to the sum of the
individual company specific risk and the systematic risk (market
risk)
With higher number of assets, total portfolio...

Which of the following statements is false?
Question 11 options:
a
The portfolio that contains all shares of all stocks and
securities in the market is called the efficient portfolio.
b
Systematic risk cannot be eliminated through
diversification.
c
A portfolio that contains only systematic risk is called an
efficient portfolio.
d
Volatility measures total risk, while beta measures only
systematic risk.
e
None of the above.

2) Assume the following information for a $20,000 investment
portfolio in stocks of MSFT and IBM. Security Return Standard
Deviation Beta $ invested MSFT 10% 8% 0.7 $15,000 IBM 14% 14% 1.7 $
5,000 Treasury Bills are returning 6% annually. Regarding the
two-stock portfolio above, which of the following statements is
true? a. As the prices in the overall market change, the price of
MSFT stock should swing farther than the price of IBM stock. b.
Because IBM provides the...

Which of the following statements is most correct?
The required rate of return of a diversified portfolio with Beta
of 1 is typically greater than the Market Risk Premium.
A stock with a negrative beta must have a negative required rate
of return.
If a stock's beta doubles its required rate of return must
double.
If a stock has a beta equal to 1.0, its required rate of return
will be unaffected by changes in the market risk premium.
None...

Discuss the meaning of the following statements: The standard
deviation of any portfolio of stocks can never be higher than the
highest individual stock standard deviation. However, a portfolio’s
standard deviation can be lower than the lowest individual stock
standard deviation. [The corollary to this is a portfolio’s
stand-alone risk could be zero even when individual stocks each
have a lot of stand-alone risks.]

2. Which of the following statements concerning beta is
correct?
a. A stock with a beta of 0 is expected to provide a rate of
return equal to the market portfolio
b. A stock with a beta equal to 1 has no risk
c. Stocks with negative betas have the least amount of risk
FALSE
d. A stock with a beta greater than 1 is expected to be more
volatile than the market portfolio

Q1. Which of the following statements about the portfolio is
true?
a. The expected return of a portfolio is NOT the weighted
average of the expected returns of all individual stocks in the
portfolio.
b. The standard deviation of a portfolio is NOT the weighted
average of the standard deviations of all individual stocks in the
portfolio.
c. Portfolio beta is NOT the weighted average of the beta values
of all individual stocks in the portfolio
Q2. Which of the...

Which of the following statements is
most accurate:
Eugene Fama developed a framework for describing the degree to
which markets are efficient. In his efficient market hypothesis,
markets are efficient when prices reflect relevant information at
any point in time.
A price discrepancy must be sufficiently large to leave the
investor with a profit (adjusted for risk) after taking account of
the transaction costs and information-acquisition costs to reach
the conclusion that the discrepancy may represent a market
inefficiency.
In...

Which of the following statements is CORRECT?
Select one: a. The beta of a portfolio of stocks is always
smaller than the betas of any of the individual stocks.
b. The beta of a portfolio of stocks is always larger than the
betas of any of the individual stocks.
c. 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...

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