Only B

1. True or False. Briefly explain your answers. a) If the weak form of market efficiency is satisfied, then the random walk hypothesis is also satisfied. b) If diversification reduces a portfolio's standard deviation, then it also reduces a portfolio's expected return. c) If the fraction of human capital in an individual's total wealth portfolio falls with age, then the optimal fraction of that person's financial wealth allocated to stocks will decline. d) According to article presented during class, the most talented mutual fund managers leave the mutual fund industry to join hedge funds. e) In the absence of arbitrage opportunities, the price of an European put option with a higher exercise price is at least as great as the price of an otherwise identical European put option with a lower exercise price. f) Historically, the data presented in the textbook and during class indicates that the average equity mutual fund holding stocks listed in the United States underperformed the Wilshire 5000 index