Quiz Ch 07 – Relationship Between Portfolio Size and Unique Risk
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
How does the unique risk change when the number of stocks in a portfolio is increased?
How does the unique risk change when the number of stocks in a portfolio is increased?
What is another term for market risk?
What is another term for unique risk?
True or false: If a stock’s covariance with the market surpasses the market’s variance, the stock will invariably possess a beta above 1.0.
True or false: In a well-diversified portfolio, the beta is equivalent to the value-weighted average beta of the portfolio’s constituent securities.
True or false: A portfolio with a beta of one equals the market risk premium in expected return.
True or false: Stocks with low standard deviation invariably exhibit low betas.
True or false: Covariance between two stocks equals the product of their correlation coefficient and standard deviations.
True or false: The risk premium is determined by comparing the return of a security with the return on Treasury bills.
True or false: Diversification lowers portfolio risk by capitalizing on the fact that prices of different securities do not move in perfect alignment.