Which of the statement is WRONG?A.The market portfolio contains all shares of all stocks and securities in the market.B.There is no clear relationship between the volatility and return of individual stocks.C.Diversification eliminates both idiosyncratic risk and systematic risk.D.The total risk of a security contains risk which is not rewarded.

Which of the following statement is false?Group of answer choicesThe risk of a well-diversified portfolio depends on the market risk of the securities included in the portfolio.The variability of a well-diversified portfolio mostly reflects the contributions to risk from the standard deviations of the stocks within that portfolio.If returns on two stocks tended to move in opposite directions, then the covariances and correlations on the two stocks would be negative.Diversification can reduce portfolio risk even in the case when correlations across stock returns equal zero.

Which of the following statement is false?Group of answer choicesA risk premium can be measured as the difference between a security's return and the Treasury bill return.Diversification reduces the risk of a portfolio because the prices of different securities do not move exactly together.The beta of a well-diversified portfolio is equal to the value weighted average beta of the securities included in the portfolio.The portfolio risk that cannot be eliminated by diversification is called unique risk.

Which of the following statements about the ‘Portfolio Theory’ section of the lecture material are TRUE:The standard deviation of a portfolio of shares in two different companies will always be less than the weighted average of the standard deviations of the individual shares.A share portfolio that follows a diversified market index is expected to offer a reasonably efficient trade-off between expected return and risk.Question 8AnswerNeither of the statements are true (both are false)Only statement 1 is trueOnly statement 2 is trueBoth statements are true (neither are false)

. Referring to the same information as in question 4:Which of the following statements is not true?The total risk of the stock is reflected in its standard deviationThe systematic or non-diversifiable risk is reflected in betaThe market risk premium is 8%The firm’s risk premium is 12%The market has a beta of 1.5

Which of the following statements does not reflect conventional wisdom with respect to risk analysis:It’s very hard to time market exits and entriesThe markets are over-valued and are due for a correctionThe market rewards additional risk by providing additional returnNegatively correlated returns would result in diversification benefitsEfficient markets suggest that prices reflect existing information