Q2. [20 points] (True, false or uncertain) Critically evaluate the following statements with appropriate explanations and/or examples: Note: 1 point for stating True, false or uncertain and 3 points for your explanation. (a) [4 points] Interest rates (yields) and bond prices have an inverse relationship. (b) 14 points) The maximum diversification benefits will be achieved if asset returns are perfectly correlated. (c) 14 points) A portfolio with 60 different railway securities, for example, would not be as well diversified as the same size portfolio with some railroad, some some public utility, mining, various sorts of manufacturing, etc. (d) [4 points) "Capital Market Line (CML) may not be a good pricing model, since it in- corporate risk-free rate in the efficient frontier setup. (e) 14 points Because it is difficult to determine an investor's utility function, Markowitz portfolio theory cannot be employed in practice to construct a Markowitz efficient port- folio. Q2. [20 points] (True, false or uncertain) Critically evaluate the following statements with appropriate explanations and/or examples: Note: 1 point for stating True, false or uncertain and 3 points for your explanation. (a) [4 points] Interest rates (yields) and bond prices have an inverse relationship. (b) 14 points) The maximum diversification benefits will be achieved if asset returns are perfectly correlated. (c) 14 points) A portfolio with 60 different railway securities, for example, would not be as well diversified as the same size portfolio with some railroad, some some public utility, mining, various sorts of manufacturing, etc. (d) [4 points) "Capital Market Line (CML) may not be a good pricing model, since it in- corporate risk-free rate in the efficient frontier setup. (e) 14 points Because it is difficult to determine an investor's utility function, Markowitz portfolio theory cannot be employed in practice to construct a Markowitz efficient port- folio.