FIN 534 RANK Imagine Your Future /fin534rank.com FIN 534 RANK Imagine Your Future /fin534rank.com | Page 61

Discuss the impact of Standard & Poor’s downgrading the U.S. credit
rating in 2011. Address current and likely future impact on U.S.
business, individuals, the global economy and current financial
practices. Provide specific examples to support your response.
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FIN 534 Week 4 Chapter 6 Solution
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Which of the following statements is CORRECT?
a. If you add enough randomly selected stocks to a portfolio, you can
completely eliminate all of the market risk from the portfolio.
b. If you were restricted to investing in publicly traded common stocks,
yet you wanted to minimize the riskiness of your portfolio as measured
by its beta, then according to the CAPM theory you should invest an
equal amount of money in each stock in the market. That is, if there
were 10,000 traded stocks in the world, the least risky possible portfolio
would include some shares of each one.
c. If you formed a portfolio that consisted of all stocks with betas less
than 1.0, which is about half of all stocks, the portfolio would itself have
a beta coefficient that is equal to the weighted average beta of the stocks