TIME ALLOTED 6MINUTES Student D risk?of the S A Only wealthy investors can diversify their portolios because B. Risk-averse investors often choose their portfolios becaus the companies came from the same industry C. Risk-averse investors often select portfolios that include only companies from of returns is less than if althe the same industry group because the familiarity reduces the risk D. Proper diversification generally results in the elimination of risk A1 B) 2 C)O D)-1 you will be left with 2. The beta of the market portfolio is 3. If you build a large enough portfolio, you can diversify away all risk B) risk, but A) undiversifiable, diversifiable )diversifiable, unsystematic D) unsystematic, systematic 4. The systematic risk (beta) of a portfolio is by holding more stocks, even if they each had the same systematic risk. A) increased B) unchanged C) decreased D) turned to 5. Inflation, recession, and high interest rates are economic events that are characterized as A) Company-specific risk that can be diversified away C) D) Systematic risk that can be diversified away. Diversifiable risk. 6. Stocks have both diversifiable risk and undiversifiable risk, but only diversifiable risk is rewarded with higher expected returns. A) True B) False 7. If you build a large enough portfolio, you can diversfy away all the risks of a portfolio. A) True B) False 8. Accounting profits is the most relevant variable the financial manager uses to measure returns. A) True B) False