TRUE or FALSE? Mark the correct answer for each statement.

a. The expected or mean return is calculated as a weighted average of the possible returns, where the weights correspond to the probabilities.

TRUE

FALSE

b. The closer the correlation is to 0, the more the returns tend to move together as a result of common risk.

FALSE

TRUE

c. The put position has a higher return in states with low stock prices; that is, if the stock has a positive beta, the put has a negative beta.

TRUE

FALSE

d. The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk

FALSE

TRUE

e. The WACC incorporates the benefit of the interest tax shield by using the firm's before-tax cost of capital for debt.

FALSE

TRUE