True or False: Even if the correlation between the returns on two securities is +1.00, if the securities are combined in the correct proportions, the resulting 2-asset portfolio will have less risk than either security held alone. False True

Verizon's stock has an expected return of 12.25%, a beta of 1.45, and is in equilibrium. If the risk-free rate is 4.81%, what is the market risk premium?

6.25%

5.72%

5.13%

5.95%

Stock A's beta is 1.9 and Stock B's beta is 0.3. Which of the following statements must be true assuming the CAPM is correct?

When held in isolation, Stock A has more risk than Stock B.

Stock B would be a more desirable addition to a portfolio than Stock A.

In equilibrium, the expected return on Stock A will be greater than the expected return on Stock B.

Stock A would be a more desirable addition to a portfolio than Stock B.