1)Identify the FALSE statement

a. Where two securities are perfectly positively correlated, there is no reduction in unsystematic risk through diversification.

b. Portfolio theory, as initially developed by Markowitz (1952), assumes that the returns from investments are normally distributed.

c .Beta is calculated by finding the covariance between the return on the asset and the return on the market and dividing it by the variance of the return on the market.

d. A well-diversified portfolio should have a beta significantly less than one.

2)Which statement regarding bond prices is false?

a. If interest rates rise, bond prices will fall.

b. All bond prices respond to changes in interest rates in the opposite direction, but they do not all respond to the same extent.

c. Bond prices and interest rates are negatively correlated.

d. If bond prices rise, interest rates will fall.

3)The ultimate objective of investment and financing decisions is to maximise:

a. the number of projects the company is invested in.

b. the amount added to the value of the owner's wealth.

c. the salaries of all employees of the firm.

d. the repayments that are made of debt