When adding a randomly chosen new stock to an existing portfolio, the higher (or more positive) the degree of correlation between the new stock and stocks already in the portfolio, the less the additional stock will reduce the portfolio's risk.
Answer the following statement true (T) or false (F)
True
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Stock X has a beta of 0.7 and Stock Y has a beta of 1.7. Which of the following statements must be true, according to the CAPM?
A. Stock Y's realized return during the coming year will be higher than Stock X's return. B. If the expected rate of inflation increases but the market risk premium is unchanged, the required returns on the two stocks should increase by the same amount. C. Stock Y's return has a higher standard deviation than Stock X. D. If the market risk premium declines, but the risk-free rate is unchanged, Stock X will have a larger decline in its required return than will Stock Y. E. If you invest $50,000 in Stock X and $50,000 in Stock Y, your 2-stock portfolio would have a beta significantly lower than 1.0, provided the returns on the two stocks are not perfectly correlated.
When you are under hypnosis which of the following is true?
Saying that a set of events is mutually exclusive and collectively exhaustive implies that one and only one of the events can occur on any trial
Indicate whether the statement is true or false
The prohibition against banks underwriting corporate securities and engaging in brokerage, real estate, and insurance activities was repealed by the
A) Gramm-Leach-Bliley Financial Services Modernization Act. B) Competitive Equality in Banking Act. C) Depositary Institution Deregulation and Monetary Control Act. D) Glass-Steagall Act.