QUESTION 21 In portfolio management, risk reduction is achieved by investing in a portfolio in which the securities a. have a law correlation b. have a high correlation c. are perfectly positively puttelated d. have a high covariance e. have a low coefficient of variation QUESTION 22 Bosco, Inc. has a beta coefficient of 1.5 and a required rate of return of 17%. The market risk premium is currently 5%. If inflation premium increases by 3 percentage points, and Bosco invests in a new project which increases its bata by 70 percent, what will be the company's new required rate of return according to the CAPM? a. 12.55% b.9.5% C. 25.25% d. None of the above e. 2.55% QUESTION 23 Steve Bricksuo currently has an invesLinen portfolio that contains four blocks with a total value equal to $80,000. The portfolio has a bela (B) equal to 1.4. lo urdur lo earn higher returns, Sleve wanls to invest an additional $20,000 in a stuck that has equal to 2.4. After Steve adds the new stock to his portfolio, what will the portfolio's beta be? a. 1.9 b. 1.8 c. 2.0 od, 1.6 e21 QUESTION 24 The standard deviation of the returns of Stock A is 45.95%, and the standard deviation of the retums of Stock B is 52.7%. Both stocks have the same mean. Which of the following statements about the stocks is correct? a. Stock A has less tight probability distribution, and hence lower total risk. b. Stock Bhas lower risk, but nothing can be said about the probability distribution C. Stock A has tighter probability distribution, and hence lower total risk. d. Stock Bhas less tight probability distribution, and hence lower total risk. 8. Slock Bhas lighter probability dastribuliva, and b e lower lutal rask