Theoretically and realistically, it is possible to have a portfolio whose risk is smaller than any of its component's risk. 1) True 2) False Question 8 (Mandatory) ( 0.5 points) If a security has low expected return and high standard deviation, then the security is worthless to be included in an efficient portfolio. 1) True 2) False Theoretically speaking, if two stocks were perfectly negatively correlated, then any portfolio formed from these two stocks would be risk free. 1) True 2) False For a well-diversified investor, the variance or standard deviation of a security's return is not the proper measure of risk for that security True False Question 10 (Mandatory) ( 0.5 points) No tax and no transaction cost are among CAPM's assumptions True False Diversification reduces the portfolio risk as more and more securities are added in. When the number of securities in the portfolio is large enough, the risk on the portfolio will be gone. 1) True 2) False