FINA 3315 | CHAPTER 5

All possible combinations of assets in a given portfolio will lie along the efficient frontier.

• True

• False

The statement "A portfolio is less than the sum of its parts." means

• it is less expensive to buy a group of assets than to buy those assets individually.

• portfolio returns will always be lower than the returns on individual stocks.

• a diversified group of assets will be less volatile than the individual assets within the group.

• for reasons that are not well understood, the value of a portfolio is less than the sum of the values of its components.

Negatively correlated assets reduce risk more than positively correlated assets.

• True

• False

Investing globally offers better diversification than investing only domestically.

• True

• False

Investing in emerging markets is an effective means of diversifying a U.S. portfolio.

• True

• False

Combining perfectly, positively correlated assets will

• increase the overall risk level of a portfolio.

• decrease the overall risk level of a portfolio.

• not change the overall risk level of a portfolio.

• increase or decrease the portfolio's risk depending on the risk of each single asset portfolio.

Diversifiable risk is also called systematic risk.

• True

• False

Standard deviation is a measure that indicates how the price of an individual security responds to market forces.

• True

• False

Market return is estimated from the average return on a large sample of stocks such as those in the Standard & Poor's 500 Stock Composite Index.

• True

• False

Betas for actively traded stocks are readily available from online sources.

• True

• False