Question
Portfolio A is a well-diversified portfolio that is equally-weighted among 7,100 different and diverse stocks. Portfolio A has an average amount of systematic risk, so
Portfolio A is a well-diversified portfolio that is equally-weighted among 7,100 different and diverse stocks. Portfolio A has an average amount of systematic risk, so it has the same amount of systematic risk as the market portfolio. Portfolio B consists of 2 stocks that operate in the athletic apparel industry: 900 shares of XYZ stock, which has a price of $14.00 per share and a beta of 0.87; and 450 shares of X Factor Gear stock, which has a price of $8.00 per share and a beta of 1.32. All stocks have some unsystematic risk and all stocks have the same level of unsystematic risk. Which one of the following assertions is most likely to be true?
| a. | Portfolio B has more systematic risk than portfolio A, and portfolio A has more unsystematic risk than portfolio B | |
| b. | Portfolio B has more systematic risk than portfolio A, and portfolio B has more unsystematic risk than portfolio A | |
| c. | Portfolio A has more systematic risk than portfolio B, and portfolio A has more unsystematic risk than portfolio B | |
| d. | Portfolio A has more systematic risk than portfolio B, and portfolio B has more unsystematic risk than portfolio A | |
| e. | Portfolio A either has the same amount of systematic risk as portfolio B or portfolio A has the same amount of unsystematic risk as portfolio B, or portfolio A has the same amount of systematic risk and unsystematic risk as portfolio B |
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