6. As diversification increases, the firm-specific risk of a portfolio approaches A. O B.1. C. infinity D. (n-1) n. E. (n + 1). 7. According to the index model, covariances among security pairs are A. due to the influence of a single common factor represented by the market index return B. extremely difficult to calculate. C. related to industry-specific events. D. usually positive. E. due to the influence of a single common factor represented by the market index return and usually positive 8. As diversification increases, the total variance of a portfolio approaches A. O B.1. C. the variance of the market portfolio. D. infinity E. None of the above are correct. 9. The expected impact of unanticipated macroeconomie events on a security's return is A. included in the security's expected return. B. equal to the risk-free rate. C. proportional to the firm's beta D. positive. Ezero. 10. One of the problems with attempting to forecast stock market values is that A. there are no variables that seem to predict market return. B. the level of uncertainty surrounding the forecast will always be quite high. C. the earnings multiplier approach can only be used at the firm level. D. dividend-payout ratios are highly variable. E. None of the above are correct