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Please complete attached assignment
330 Week 3 – Assigned Problems
For this week the assignment is in the form of True or False questions.
Create an answer sheet with number and answer (either T or F). Please do not include the questions on your answer sheet. Thank you.
1. Most investors are risk averse, since for a given increase in return they require an increase in risk.
2. The coefficient of variation is useful for evaluating the risk of a security held in a portfolio.
3. Longer-lived assets usually are more risky because it is more difficult to accurately forecast cash flows that occur far into the future.
4. Adding an asset to a portfolio that is perfectly positively correlated with existing portfolio returns will have no affect on portfolio risk.
5. There is no possible way that combining assets into a portfolio will result in a portfolio that is riskier than its riskiest asset.
6. Unless assets are negatively correlated, combining assets into a portfolio will not reduce portfolio risk.
7. A firm with a negative beta may have high sales when the economy weakens and low sales when the economy recovers.
8. Diversifiable risk is the only risk that influences the required return because non-diversifiable risk can be eliminated.
9. Beta measures non-diversifiable risk, or, market risk.
10. Beta is the slope of the security market line.
11. The characteristic line maps the relationship between the return on the market and the return on a security. Its slope is beta.
12. As investors become more risk averse, the market risk premium increases and the security market line becomes steeper.
13. Fixed income securities, such as bonds or preferred stocks, usually have betas equal to zero.
14. Risk can best be defined in finance as the chance of a loss.
15. The standard deviation is a measure of relative dispersion and is used in comparing the risk of assets with differing expected returns.
16. Standard deviation can be used to measure risk on an ex-ante basis using historical returns.
