Quiz Ch 08 – T/F Investor Focus on Diversifiable Risks
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
True or false: Investors predominantly emphasize risks that can be diminished through diversification.
True or false: Investors predominantly emphasize risks that can be diminished through diversification.
True or false: Investors generally prefer portfolios with greater Sharpe ratios holding other factors constant.
True or false: Given equal expected returns, most investors would lean towards the investment with greater variance.
True or false: Given equal variance, nondiversified investors would prefer stock B with a 14 percent expected return over stock A with a 12 percent expected return.
True or false: Portfolios positioned towards the top-left quadrant on a diagram depicting expected return against standard deviation are generally preferred by most investors.
True or false: Stocks positioned above the security market line are considered overpriced.
True or false: Stocks deemed overpriced will appear beneath the security market line.
True or false: Introducing real estate as an investment option, in addition to common stocks, is expected to broaden the efficient frontier, enhancing the trade-off between risk and return.
True or false: Stocks’ long-term annual returns exhibit a stronger connection to the normal distribution than the lognormal distribution.
True or false: Stocks considered underpriced will be situated beyond the security market line.