QUESTION BELOW

1. Under the classic View that the nancial manager acts solely on behalf of the interest of shareholders, if the shareholders are unwilling to hold a lot of risk in their portfolios, then the manager should try to avoid high risk projects even if they offer high NPV. True False 2. Assume MM holds with no friction, if the rm can issue riskfree debt and its asset has positive beta (5A > 0), then the manager can increase the expected return of equity by taking on more leverage. True False 3. Following the previous question, the equity holders should urge the manager to take on more leverage because it would create value for them. True False 4. If the CAPM holds, then the expected return of any risky asset or portfolio cannot be lower than the risk-free rate because beta cannot be negative. True False 5. An extremely risk-averse investor should hold the minimum variance portfolio rather than the tangent portfolio even though the tangent portfolio offers the best riskreturn tradeoff. True False