choose the correct answer:

The risk on a portfolio of assets:

a. is different from the risk on the market portfolio.

b. is not influenced by the risk of individual assets.

c. is different from the risk of individual assets.

d. is negatively correlated to the risk of individual assets.

Which of the following is correct of how the returns on assets move together?

a. Positive and negative deviations between assets at similar times give a negative covariance.

b. Positive and negative deviations between assets at dissimilar times give a negative covariance.

c. Positive and negative deviations between assets give a zero covariance.

d. Positive and negative deviations between assets at dissimilar times give a positive covariance..

. An efficient frontier is:

a. a combination of securities that have the highest expected return for each level of risk.

b. the combination of two securities or portfolios represented as a convex function.

c. a combination of securities that lie below the minimum variance portfolio and the maximum return portfolio.

d. a combination of securities that have an average expected return for each level of risk.

If the returns on different assets are uncorrelated:

a. an increase in the number of assets in a portfolio may bring the standard deviation of the portfolio close to zero.

b. there will be little gain from diversification.

c. diversification will result in risk averaging but not in risk reduction.

d. the expected return on a portfolio of such assets should be zero.

Using the Sharpe single-index model with a random portfolio of U.S. common stocks, as one increases the number of stocks in the portfolio, the total risk of the portfolio will:

a. approach zero.

b. approach the portfolio's systematic risk.

c. approach the portfolio's non-systematic risk.

d. not be affected.

What is the concept behind the indexes used in the Fama and French Model?

a. Form portfolios with standard deviations that mimic the impact of the variables.

b. Form portfolios with returns that are opposite to the impact of the variables.

c. Form portfolios with returns that mimic the impact of the variables.

d. Form portfolios with standard deviations that are opposite to the impact of the variables.