Risk and Return. True or false? Explain or qualify as necessary. 

a. Investors demand higher expected rates of return on stocks with more variable rates of return.

b. The capital asset pricing model predicts that a security with a beta of zero will provide an expected return of zero.

c. An investor who puts $10,000 in Treasury bills and $20,000 in the market portfolio will have a portfolio beta of 2.0.

d. Investors demand higher expected rates of return from stocks with returns that are highly exposed to macroeconomic changes.

e. Investors demand higher expected rates of return from stocks with returns that are very sensitive to fluctuations in the stock market.

f. The CAPM implies that if you could find an investment with a negative beta, its expected return would be less than the interest rate.

g. If a stock lies below the security market line, it is undervalued 

Answer rating: 100% (QA)

a Investors demand higher expected rates of return on stocks with more variable rates of return Fals... View the full answer