Question

As a well-diversified portfolio owner, my first preference for an addition to my portfolio would be:

Select one: a. Negative-beta stock b. AAA Corporate Bond c. Zero-beta stock d. Treasury bill

Answer 1

As a Well Diversified portfolio owner, The first preference should be AAA Corporate bonds

AAA corporate bonds are the highest rated bonds by the credit agencies, it shows that the issuer's credit worthiness that the issuer can pay the cost of debt even in crisis and recession. These bonds gives regular coupon payments and are generally traded in the secondary market where the investor can buy and sell the bonds, These bonds carries lower rate of return than lower rated binds, but the risk is negligible.

Negative beta stocks will has high volatility as it will in upward direction when the market will fall and vice-versa which shows higher risks.

Zero beta stocks reprensents the stocks that will not move in either direction whether market will go up and down, but these stocks has no market exposure which will unlikey to attract investors. The Treasury bills are issued by the government which carries no interest but issued at discount and redeemable at par, these are traded in secondary markets but the yield rates are generally lower than long term securities.