1. What are beta measures?

(a) The volatility of the security (b) The joint volatility of any two securities in a portfolio

(c) The volatility of a security divided by the volatility of the market index

(d) The relative co-movement of a security with the market portfolio

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2. Which of the following statements about a stocks beta is true?

   I. A beta greater than one is riskier than the market

   II. A beta less than one is less risky than the market
3. III. A beta less than one is risk-free

4. IV. A beta less than one is undervalued

   (a) Statement I alone (b) Statement III alone

   (c) Statements I and III (d) Statements I and II

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2. Which of the following statements about the Sharpe ratio is false?

   1. (a) The Sharpe ratio can be used to evaluate absolute performance of undiversified portfolios.

   2. (b) The Sharpe ratio considers both the systematic and unsystematic risks of a portfolio.

   3. (c) The Sharpe ratio is equal to the excess return of a portfolio over the market return divided by the total risk of the portfolio.

   4. (d) The Sharpe ratio is derived from the capital market line.