INSTRUCTIONS: For each of the statements (or questions) below, in two or three well-written sentences, explain succinctly and cogently why that statement is FALSE (or incorrect). Please focus specifically on what makes the statement WRONG.

1. The current available evidence offers little support to the efficient markets hypothesis because market prices follow a random walk and further market prices are typically unrelated to company performance. 2. Diversifying a person's portfolio by adding more stocks to the portfolio increases the standard deviation of the value of the portfolio. This indicates the portfolio's risk has increased, probably because the added stocks are market outliers. 3. Tami knows that people in her family usually die young. For that reason, she buys life insurance. Preston is aware that he drives recklessly and, for that reason, he applies for automobile insurance. Neither situation presents a problem for an insurance company. The insurance company will simply adjust the rates appropriately for both Tami and Preston