21. A diversified portfolio

	a.	increases systematic risk
	b.	reduces systematic risk
	c.	increases unsystematic risk
	d.	reduces unsystematic risk

22. The risk associated with dispersion around an expected value (e.g., expected return) is measured by the

	a.	beta coefficient
	b.	range (i.e., highlow values)
	c.	standard deviation
	d.	debt to total assets (i.e., the debt ratio)

23. Systematic risk

1. is the tendency for a stock's return and the return on the market to move together

2. is reduced by constructing a diversified portfolio

3. depends on the firm's business and financial risk

4. is measured by beta coefficients

	a.	1 and 2
	b.	2 and 3
	c.	1 and 4
	d.	2 and 4

24. A beta coefficient for a risky stock is

	a.	less than 1.0
	b.	equal to 1.0
	c.	greater than 1.0
	d.	negative

25. A beta coefficient of 1.2 implies

1. the stock is more risky than the market

2. the stock's return is 1.2 times the return on the market

3. the stock is less risky than the market

4. the market's return is 1.2 times the return on the stock

	a.	1 and 2
	b.	1 and 4
	c.	2 and 3
	d.	3 and 4

26. An investor may reduce risk by selecting

	a.	high beta stocks
	b.	stocks with poorly correlated returns
	c.	a crosssection of firms in the same industry
	d.	stocks traded on organized exchanges

27. To measure risk, the capital asset pricing model uses

	a.	beta
	b.	an asset's standard deviation
	c.	the volatility of an asset's cash flows
	d.	the term during which the asset is held