1. Which is the following is most correct?
a. Beta is found by calculating the slope of a plot of historical stock returns vs. historical market returns.
b. If you were to form a portfolio by randomly selecting stocks, that portfolio’s beta would be around 0.
c. The more stocks you add to a portfolio the lower the beta.
d. It is not possible for a stock to have a negative beta.
e. All of the answers are correct.
2. Which of the following is true regarding probability distributions?
a. The flatter the probability distribution, the less risk is involved.
b. The returns of a Treasury bond have a vertical line for a probability distribution.
c. The returns of a Treasury bond have a horizontal line for a probability distribution.
d. The further away something is from the mean, the more likely it is to occur.
e. None of the answers are correct.