6. Which of the following statements is CORRECT?

A. Sharpe ratio is equal to the slope of the capital market line.

B. Whenever the risk-free rate increases, the market risk premium will also increase. C. If a companys beta is halved, its expected stock return will also be halved. D. The slope of the capital allocation line is equal to the market return.

7. Which of the following statements is CORRECT?

A. The risk that remains in a fully diversified portfolio is systematic risk, which is constant for all stocks in the market.

B. Portfolio diversification reduces the firm-specific risk in a nonlinear manner. C. Risk refers to the chance that some unfavorable event will occur. D. A stock with a beta of zero has zero total risk.

8. The term complete portfolio refers to a portfolio consisting of _________________. A. the risk-free asset combined with the minimum-variance portfolio B. the risk-free asset combined with a risky portfolio

C. common stocks combined with bonds

D. securities from domestic markets combined with securities from foreign markets