Question 1 (1 point) select all true statements CAPM can be used to estimate the required return of an asset given its standard deviation, the required return of the market and the risk free rate If markets are in equilibrium and the expected return of the market is 13%, a stock with a beta of 1 should have an expected return of 13% Holding everything else constant, assets with higher betas should have higher required returns CAPM can be used to estimate the required return of an asset given its beta, the required return of the market and the risk free rate Question 2 (1 point) select all true statements If an asset increases its value by a steady constant rate, say 3%, then this asset has a risk of 0% Assets whose prices are constant over time have returns equal to 0% Assets whose returns are constant have a risk (measured by standard deviation) of zero If a stock that is priced at $100 decreases its value to $75, then it produced a return of 25% If an asset increases its value by a steady constant rate, say 3%, then this asset has a risk of 3% Question 4 (1 point) select all true statements the beta of a diversified portfolio that mimics the market (such as the S&P500) is 1 systematic risk can be completely eliminated by investing in multiple assets total risk, measured by standard deviation, reflects both systematic and diversifiable risk the beta of TBills (or any other risk free asset) is zero Question 5 (1 point) select all true statements If you want to reduce the risk of a portfolio, you are more likely to achieve this goal with two assets with a correlation of 0.9 than with two assets with a correlation of 0.1 if the returns of two risky assets have a correlation of zero, it is possible to create a portfolio with zero risk If two assets have a risk of 20%, it is possible to obtain a risk of zero if a) their correlation is -1 and b) we pick specific portfolio weights correlation of returns is a number that ranges between 0 and 1