Indicate whether the following statements are true or false. a. Investors prefer diversified companies because they are less risky. multiple choice 1 True False b. If stocks were perfectly positively...

Indicate whether the following statements are true or false.

a.Investors prefer diversified companies because they are less risky.

 multiple choice 1

• 
  
  
  

  True

  
  
  
  


• 
  
  
  

  False

  
  
  
  

b.If stocks were perfectly positively correlated, diversification would not reduce risk.

multiple choice 2

• 
  
  
  

  True

  
  
  
  


• 
  
  
  

  False

  
  
  
  

c.Diversification over a large number of assets completely eliminates risk.

multiple choice 3

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  True

  
  
  
  


• 
  
  
  

  False

  
  
  
  

d.Diversification works only when assets are uncorrelated.

multiple choice 4

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  True

  
  
  
  


• 
  
  
  

  False

  
  
  
  

e.Diversification reduces the portfolio beta.

multiple choice 5

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  True

  
  
  
  


• 
  
  
  

  False

  
  
  
  

f.A portfolio of stocks, each with a beta of 1.0, will have a beta of less than 1.0 unless the returns are perfectly correlated.

multiple choice 6

• 
  
  
  

  True

  
  
  
  


• 
  
  
  

  False

  
  
  
  

g.A stock with a low standard deviation always contributes less to portfolio risk than a stock with a higher standard deviation.

multiple choice 7

• 
  
  
  

  True

  
  
  
  


• 
  
  
  

  False

  
  
  
  

h.The contribution of a stock to the risk of a well-diversified portfolio depends on its market risk.

multiple choice 8

• 
  
  
  

  True

  
  
  
  


• 
  
  
  

  False

  
  
  
  

i.A well-diversified portfolio with a beta of 2.0 is twice as risky as the market portfolio.

multiple choice 9

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  True

  
  
  
  


• 
  
  
  

  False

  
  
  
  

j.An undiversified portfolio with a beta of 2.0 is less than twice as risky as the market portfolio.

multiple choice 10

• 
  
  
  

  True

  
  
  
  


• 
  
  
  

  False