Which of the following statements is most correct?If you add enough randomly selected stocks to a portfolio, you can completely eliminate all of the market risk from the portfolio.If you form a large portfolio of stocks each with a beta greater than 1.0, this portfolio will have more market risk than a single stock with a beta = 0.8.Company-specific risk can be reduced by forming a large portfolio, but normally even highly diversified portfolios are subject to market risk.Answers a, b, and c are correct.Answers b and c are correct.

The beta value is indicating the volatile of the stock. If the beta value is greater than 1, then…

Answered: Which of the following statements is…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following statements is most correct?

If you add enough randomly selected stocks to a portfolio, you can completely eliminate all of the market risk from the portfolio.
If you form a large portfolio of stocks each with a beta greater than 1.0, this portfolio will have more market risk than a single stock with a beta = 0.8.
Company-specific risk can be reduced by forming a large portfolio, but normally even highly diversified portfolios are subject to market risk.
Answers a, b, and c are correct.
Answers b and c are correct.

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