Problem 1: True or False (8 points) Are the following statements true or false? Please briefly explain your answer. a) (2 points) There are 2 stocks: A and B. Stock B has a smaller standard deviation than stock A. Statement: The variance of a portfolio of stocks A and B must be at least as high as the variance of stock B. b) (2 points) CAPM holds. Statement: If the expected market return increases, but stock A beta and risk-free rate stay constant, then the expected return on stock A must increase. c) (2 points) CAPM holds. Statement: If the expected market return increases and stock A beta increases, but the risk-free rate stays constant, then the expected return on stock A must increase. d) (2 points) Firm A operates in a country where there are no corporate taxes. The cost of firm A equity decreases and the cost of firm A debt stays the same. The proportion of the firm financed by debt stays the same. Statement: The weighted average cost of capital for firm A will decrease