Assume that the single-index model holds and we can price a portfolio using

RP (t) = P + PRm(t) + eP (t)

We create a portfolio (P10) by equally weighting across 10 randomly picked stocks. We then create a second portfolio (P100) by equally weighting across the previous 10 stocks and another 90 randomly picked stocks. According to this process, we expect to observe:

I. The return on P10 is less than the return on P100.

II. The volatility of P10 is lower than the volatility of P100. I

II. The beta of P10 is closer to 1 than is the beta of P100: |p10 1| < |p100 1|

Which statements are true?