Question

True or​ False: The best measure to use when comparing alternative investments is the amount of...

True or​ False:

  1. The best measure to use when comparing alternative investments is the amount of the dollar gain or loss.
  2. With holding periods of more than a​ year, annualizing the HPR makes it smaller.
  3. The lower the correlation coefficient between two​ stocks, the greater will be the benefit from diversifying by combining the two stocks in a portfolio.
  4. Based on the period 1950​ – 1999, you would have the less uncertainty about any expected return on small company stocks than you would about the expected return on large company stocks.
  5. Our author discusses the average return and standard deviation for 4 different assets for the period 1950​ – 1999.
  6. "Diversifiable” risk,​ “Company-specific” risk,​ “Unsystematic” risk and​ “Market” risk all refer to the same type of risk.
  7. By diversifying you can eliminate most or all of unsystematic risk.
  1. the standard deviation is the square root of the variance.
  1. A stock with​ one-half the average market risk would have a value for beta of 2.0.

  1. The only variable on the​ right-hand side of the CAPM formula that varies from one company to another is expected return on the market.
  1. In order to properly evaluate a​ stock, investors need only consider its​ risk.,
  1. Investors should always choose stocks with the highest​ reward-risk ratio.

  1.  Ceteris paribus​, ower standard deviations represent greater risk.

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