al assumptions regarding investor behavior. Which e as being represented by a probability 17. The Markowitz model is based on several assumptions regarding - of the following is not such any assumption? Investors consider each investment alternative as being represented by distribution of expected returns over some holding period Investors maximize one-period expected utility. Investors estimate the risk of the pamfolio on the base of the variability of capa Investors base decisions solely on expected return and risk None of the above (that is, all are assumptions of the Markowitz model) b. C. DJ Doudu The probability of an adverse outcome is a definition of Statistics. Variance. Random Risk. Semi-variance above the mean. 19. A portfolio is considered to be efficient if: No other portfolio offers higher expected returns with the same risk No other portfolio offers lower risk with the same expected return. There is no portfolio with a higher return. Choices a and b All of the above 20. A portfolio manager is considering adding another security to his portfolio. The correlations of the 5 alternatives available are listed below. Which security would enable the highest level of risk diversification? 0.0 0.25 -0.25 d. -0.75 1.0 c. 21. A stock has a beta of 1.25. The risk free rate is 5% and the return on the market is 6%. The estimated return for the stock is 14%. According to the CAPM you should Sell because it is overvalued. Sell because it is undervalued. Buy because it overvalued. Buy because it is undervalued. Short because it is undervalued. b