Diversifiable risk includes _____.

Select one:

a. maturity risk

b. business risk

c. interest rate risk

d. liquidity risk

e. political risk

The larger the standard deviation of returns of an investment, _____.

Select one:

a. lesser is the chance that the realized return will differ significantly from the expected return

b. lesser is the chance that the realized return will be negative

c. greater is the chance that the realized return will differ significantly from the expected return

d. greater is the chance that the realized return will be negative

e. greater is the chance that the investment will outperform the market

Which of the following is a component of systematic risk?

Select one:

a. Financial risk

b. Stand-alone risk

c. Business risk

d. Default risk

e. Liquidity risk

Which of the following statements about beta and risk is correct?

Select one:

a. A security's beta measures its diversifiable (systematic, or market) risk relative to that of other securities.

b. If two stocks have the same standard deviation and the correlation coefficient between the returns of two stocks equals zero, an equally weighted portfolio of the two stocks will have a standard deviation equal to that of the individual stocks.

c. Combining stocks with perfectly positively correlated stock returns into a portfolio is less risky than holding an individual stock since the portfolio will benefit from diversification.

d. If the returns of two firms are negatively correlated, one of them must have a negative beta.

e. A stock's beta is less relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only one stock.