8. (5) True or false or Uncertain. Explain briefly.
a: False: CAPM beta represents the systematic risk of stock and variance represent unsystematic risk or diversifiable risk. Hence both cant be compared
b: True; CAPM which is based on efficient market hypothesis states that expected alpha is zero for all securities
c: uncertain: Optimal portfolios are created by considering overall risk and correlation between each stocks and we cant say a stock has to be avoided because it has inferior risk or return
d: False; standard deviation represents risk and stock with high std dev contributes heavily to portfolio risk
e: False: A diversification can provide same portfolio return with lower risks.
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