State whether each of the following statements is true or false, and briefly explain why. 10 marks each. a) If two stocks have positive covariance, then if one stock doubles in price, the other will also double in price. b) A basic assumption of the capital asset pricing model (CAPM) is that there are no transaction costs. If this assumption is relaxed, diversification benefits will be realized up to the point that they offset transactions costs. c) All else equal, the Sharpe ratio of a portfolio increases if the risk free rate of interest increases. d) In an economy where all investors are risk neutral, all investment assets should return the risk-free rate of interest. e) Asset correlations are dynamic, i.e. they change in time. If during times of high market stress, most asset correlations increase greatly, then diversification benefits are reduced.