a level perpetuity? A growing perpetuity? B1. Multiple choice etc. questions Which of the following sequences is arranged in the correct order, firom highest long-term returns to lowest? A) Small stocks, government bonds, large stocks B) Large stocks, treasury bills, small stocks C) Small stocks, large stocks, treasury bills D) Government bonds, large stocks, treasury bills 2) Riskier investments have traditionally had lower retums than lessrisky investments have had. True False 3) Which of the following statements is correet? A) Portfolio diversification reduces the variability of the returas on the individual stocks held in a portfolio. B) Portfolio A has one security, while Portfolio B has 100 securities. Because of diversification, we would expect Portfolio B to have lower risk C) If an investor buys enough stocks, he or she can, through diversification, eliminate all market risk. D) Diversification can be achieved by parchasing stocks that are perfectly positively correlated. The capital asset pricing model: A) provides a risk-retum trade-off in which risk is measured in terms of the market retuns B) provides a risk-retum trade-off in which risk is measured in terms of beta. C) measures risk as the coefficient of variation between security and market rates of retun. D) depicts the total risk of a security. 4) Changes in the national economy, such as changes in interest rates or tax laws, represent what type of risk? A) Unique risk B) Market risk Unsystematic risk Diversifiable risk 6) Common stockholders expect greater returns than bondholders because A) They have no legal right to receive dividends B) They bear greater risk C) In the event of liquidation, they are only entitded to receive any cash that is left alisr all editors are paid All of the above