True False 0 0 1. RETURN = LOSS / ORIGINAL COST O 0 o O O O 2. If Stock X has a higher profit than Stock Y. it is not fair to assume that Stock X has a higher HPR. 3. A quarterly return of 3% equates to an EAR of 12%. 4. Large company stocks tend to have larger standard deviations than small company stocks. 5. In a normal distribution, about 95% of all observations fall within two standard deviations of the average. 6. It is not possible to earn more than 100% in a single year. O O O O 0 0 7. In the CAPM equation, stocks with larger betas will have lower expected returns. 8. The SML intersects the risk axis when graphed. o o O o 9. The market risk premium would be the same for stocks with different betas. O 0 O 0 10. It is fair to say that systematic risk can be diversified away. 11. Probabilities range from - 100% to 100%. 12. When two states of the economy have probabilities of 50% and their possible returns are 8% and -10%, the expected return 40%. O O 15. The APR for the stock in #14 > 15%. O o 16. The EAR for the stock in #14 > 10%. O O 17. The average of 10%, 20%, -10% and 0% is less than 6%. O 18. The standard deviation of the returns in #17 is more than 15%. O 0 o 19. An equally weighted portfolio containing stocks with betas of 1.2 and 0.6 would have a beta