a. A portfolio of stocks, each with a beta of 1.0, will have a beta of less than 1.0 unless the returns are perfectly correlated.

• True

• False

b. A stock with a low standard deviation always contributes less to portfolio risk than a stock with a higher standard deviation.

• True

• False

c. The contribution of a stock to the risk of a well-diversified portfolio depends on its market risk.

• True

• False

d. A well-diversified portfolio with a beta of 2.0 is twice as risky as the market portfolio.

• True

• False

e. An undiversified portfolio with a beta of 2.0 is less than twice as risky as the market portfolio.

• True

• False