Assume That the Assumptions Underlying the Standard CAPM Hold

question 5

Short Answer

Assume that the assumptions underlying the standard CAPM hold.Indicate whether each of the following statements is true or false.
a. A firm with a high variance will have a higher beta than a firm with a low variance.
b. A portfolio is efficient if it has no unsystematic risk.
c. A firm that is highly correlated with the market will have a higher beta than a firm that is less correlated.
d. If the variance of the market portfolio goes up, the betas of all securities will go down.
e. A well-managed firm will have a lower beta than a poorly managed firm.
f. The market portfolio is efficient. Therefore, it contains only the best stocks in the market.
g. A risk-seeking investor should hold the riskiest stocks in the market, and a risk-averse investor should hold the safest stocks.
h. If the riskless rate increases, the slope of the capital market line will decrease.

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