Assume that the assumptions underlying the standard CAPM hold.Indicate whether each of the following statements is true or false.
a. A firm with a high variance will have a higher beta than a firm with a low variance.
b. A portfolio is efficient if it has no unsystematic risk.
c. A firm that is highly correlated with the market will have a higher beta than a firm that is less correlated.
d. If the variance of the market portfolio goes up, the betas of all securities will go down.
e. A well-managed firm will have a lower beta than a poorly managed firm.
f. The market portfolio is efficient. Therefore, it contains only the best stocks in the market.
g. A risk-seeking investor should hold the riskiest stocks in the market, and a risk-averse investor should hold the safest stocks.
h. If the riskless rate increases, the slope of the capital market line will decrease.

Question

Assume that the assumptions underlying the standard CAPM hold.Indicate whether each of the following statements is true or false.
a. A firm with a high variance will have a higher beta than a firm with a low variance.
b. A portfolio is efficient if it has no unsystematic risk.
c. A firm that is highly correlated with the market will have a higher beta than a firm that is less correlated.
d. If the variance of the market portfolio goes up, the betas of all securities will go down.
e. A well-managed firm will have a lower beta than a poorly managed firm.
f. The market portfolio is efficient. Therefore, it contains only the best stocks in the market.
 g. A risk-seeking investor should hold the riskiest stocks in the market, and a risk-averse investor should hold the safest stocks.
 h. If the riskless rate increases, the slope of the capital market line will decrease.

Quizplus · Accepted Answer

The Answer of Assume that the assumptions underlying the standard CAPM hold.Indicate whether each of the following statements is true or false.
a. A firm with a high variance will have a higher beta than a firm with a low variance.
b. A portfolio is efficient if it has no unsystematic risk.
c. A firm that is highly correlated with the market will have a higher beta than a firm that is less correlated.
d. If the variance of the market portfolio goes up, the betas of all securities will go down.
e. A well-managed firm will have a lower beta than a poorly managed firm.
f. The market portfolio is efficient. Therefore, it contains only the best stocks in the market.
 g. A risk-seeking investor should hold the riskiest stocks in the market, and a risk-averse investor should hold the safest stocks.
 h. If the riskless rate increases, the slope of the capital market line will decrease.

Assume That the Assumptions Underlying the Standard CAPM Hold