Quiz Ch 07 – Range of Correlation Coefficient Values
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
In which range of values can correlation coefficients exist?
In which range of values can correlation coefficients exist?
How does the unique risk change when the number of stocks in a portfolio is increased?
What is another term for market 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.