a)A portfolio manager boasted that his portfolio earned a return of 28% while the general market returned only 10% over that same period. He claims superior analytical abilities and is requesting a raise from you, his supervisor. How should you respond? You should examine the securities in his portfolio. If he is investing in high -beta stocks (i.e., > 1.0), he should be earning more than the general market since he is exposing your firm to more risk. True or false?

b)Risk is the change that the actual return will differ from the expected outcome. True or false?

c)Does the correlation of the individual securities returns affect the expected return on a portfolio of securities? True, it does, or false, it does not?

d)Investors can compare alternative investments using holding period returns. True or false?