Which statement is correct regarding the following information? - Shares in company A have an expected return of 8%, standard deviation of 15%  and beta coefficient of 1.3- Shares in company B have an expected return of 12%, standard deviation of 25% and beta coefficient of -0.75.Group of answer choicesIn a single asset portfolio, security A would be riskier because its coefficient of variation is higher than security B.In a single asset portfolio, security B would be riskier because its coefficient of variation is higher than security ASecurity A is less risky if held in a diversified portfolio because of its positive correlation with market portfolioSecurity B is riskier if held in a diversified portfolio because of its beta coefficient of –0.75None of the options is correct.

Which of the following statements is incorrect?Group of answer choicesIf two assets with return correlation coefficients less than one make up a portfolio, then the portfolio takes advantage of diversification benefits.If you were to completely diversify your portfolio by purchasing a portion of every asset in the investment universe, then the expected return of your portfolio is equal to the risk-free rate.Diversification cannot be a hedging tool for systematic risk.If you are trying to determine whether to purchase Security A or Security B as the only holding in your portfolio, then you can consider the coefficient of variation in order to understand the risk-return relationship of the individual securities.If the price of an asset has increased since the original purchase of the asset, then the total return of the asset (if no dividends were paid during the period) is equal to the capital appreciation component return.

Which of the following statements is true?Group of answer choicesA stock having a covariance with the market that is higher than the variance of the market will always have a beta above 1.0.Stocks with high standard deviations will necessarily also have high betas.The standard deviation of a two-stock portfolio generally equals the value-weighted average of the standard deviations of the two stocks.A portfolio with a beta of one offers an expected return equal to the market risk premium.

Share A:Possible outcomesProbability (%)Return (%)Pessimistic208Most likely3514Optimistic4525 Share B:The expected return of share B is 15% and its standard deviation is 8%. Assume that you are a highly risk averse investor; determine the share(s) that you would prefer to invest in based on the coefficient of variation (CV) of the shares above?Select one:a.Shares A and B, as they have the same CVb.Share Ac.Share Bd.Share A and B, as they have different CV

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.

Single choice5)Given the same expected return between two securities, a rational investor would prefer the security with:More expected riskLess expected riskRisk is not a relevant factor when considering securities