Are the following statements true or false? Explain.

a. You can construct a portfolio with a beta of .75 by investing 75% of your wealth in T-bills and

the remainder in the market portfolio.

b. To create the optimal portfolio for a risk averse investor requires that they avoid stocks with high

standard deviation.

c. According to the SML, stocks with positive alphas are underpriced.

d. If alpha is zero, the actual return plots on the SML.