Which of the following would decrease a portfolio s systematic risk? a. Common s

Question

Which of the following would decrease a portfolio s systematic risk?

a. Common stock with positive beta is sold and replaced with Treasury bills.

b. Stocks with a beta equal to the market portfolio beta are added to a portfolio of Treasury bills.

c. Low-beta stocks are sold and replaced with high-beta stocks.

d. A stock is sold in favor of a different stock with the same beta.

e. The portfolio beta is less than one and the risk-free rate declines.

a. Common stock with positive beta is sold and replaced with Treasury bills.

b. Stocks with a beta equal to the market portfolio beta are added to a portfolio of Treasury bills.

c. Low-beta stocks are sold and replaced with high-beta stocks.

d. A stock is sold in favor of a different stock with the same beta.

e. The portfolio beta is less than one and the risk-free rate declines.

Explanation / Answer

Option A is correct,  Common stock with positive beta is sold and replaced with Treasury bills. As portfolio with T- bills has lowest systematic risk and increasing its % in portfolio will decrease

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