What do we call efficient portfolios to the left of the market portfolio?

fully invested portfolios

borrowing portfolios

dominant portfolios

lending portfolios

With the APT, risk is defined in terms of a stock's sensitivity to basic economic factors.

True

False

The APT was developed in 1976 by

Modigliani and Miller

Sharpe

Lintner

Fama

Ross

The market rate of return is 0.11. Risk-free rate is 0.04. If you expect a stock with a beta of 1.0 to offer a rate of return of 0.11, you should

sell short the stock because it is overpriced.

buy the stock because it is underpriced.

buy the stock because it is overpriced.

sell stock short the stock because it is underpriced.

hold the stock because it is fairly priced.

Which statement about portfolio diversification is correct?

Proper diversification can eliminate systematic risk and increases return.

Proper diversification can eliminate systematic risk.

Typically, as more securities are added to a portfolio, total risk would be expected to decrease at a decreasing rate.

The risk-reducing benefits of diversification do not occur meaningfully until at least 50-60 individual securities have been purchased.

Because diversification reduces a portfolio's total risk, it necessarily reduces the portfolio's expected return.

The minimum variance portfolio, when there is no risk-free rate, is

always efficient

usually efficient

never efficient

usually the optimal portfolio

What is the expected return of a zero-beta security?

The risk-free rate.

The market rate of return.

Zero rate of return.

A negative rate of return.

A return much higher than the risk-free rate.

Which of the following statements regarding intrinsic value and market price is true?

If the intrinsic value is greater than the current market price, the stock is considered speculative.

If intrinsic value is greater than the current market price, the stock should be avoided or, if already held, sold.

If intrinsic value is less than the current market price, the stock is undervalued.

If intrinsic value is equal to the current market price, the stock is correctly valued.

Beta is a measure of systematic risk and relates one security's return to another security's return.

True

False

no need to explain. just answer