two stocks have a correlation coefficient of 95 this would indicate that the stock prices have historically had very similar movements. In other words when one increased in value, the other did as well, and generally by similar percentages A. True B. False Chapter 8 (Portfolilo Theory and the Capital Asset Pricing Model) 63. A stock's contribution to the risk of a fully diversified portfolio depends on its sensitivity to market changes. This sensitivity is generally known as beta. A. True 8. False 64. The Sharpe ratio is used by investors to measure the risk-adjusted performance of investment managers. Assume that the historical return on a specific stock is 10%. Also assume that the standard deviation of that stock is 25% and beta is 1.75. Finally assume that the risk-free rate of return in 1.5%. Based on these factors, calculate the Sharpe Ratio. A. Cannot calculate without knowledge of dividend yield .34 B. C. 40 D. 1.0 65. Since 1900 the market risk premium has averaged: A. B. Between 0 and 5.0% Between 5.096 and 10% Between 10% and 15% C. D. Less than 0 The Capital Asset Pricing Model has proven that, in a competitive market, the expected risk premium varies in direct proportion to: 66. A. Dividend yield B. Price/Earnings Ratio C. Earnings per Share D. Beta 67. In well-functioning markets, nobody should acquire/hold a stock that offers a return less than the market risk premium. A. True B. False