Quiz Ch 07 – T/F Diversification Impact on Portfolio Risk
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
True or false: Portfolio risk can be lowered through diversification, even when stock return correlations are zero.
True or false: Portfolio risk can be lowered through diversification, even when stock return correlations are zero.
True or false: Investors can attain both a risk-free nominal rate of return and a risk-free real rate of return by investing in U.S. government bonds.
True or false: Estimating Stock Risk Premium through Historical Returns Analysis
True or false: Log-normally distributed returns typically result in a higher annual geometric average return compared to the arithmetic average return.
True or false: Opposite movements in the returns of two stocks result in negative covariances and correlations.
True or false: Market risk, the portion of portfolio risk resistant to diversification, cannot be fully eliminated.
True or false: A well-diversified portfolio’s risk is determined by the market risk of its included securities.
True or false: The mean beta across all market stocks is zero.
True or false: The risk in a well-diversified portfolio is primarily influenced by the individual stock standard deviations.
True or false: Typically, the standard deviation of a portfolio comprising two stocks is in line with the value-weighted average of the standard deviations of the individual stocks.