Identify the FALSE statement a. Where two securities are perfectly positively correlated, there is no reduction in unsystematic risk through diversification. b. Portfolio theory, as initially developed by Markowitz (1952), assumes that the returns from investments are normally distributed. c. Beta is calculated by finding the covariance between the return on the asset and the return on the market and dividing it by the variance of the return on the market. d. A well-diversified portfolio should have a beta significantly less than one.

Identify the FALSE statement a. Where two securities are perfectly positively correlated, there is no reduction in unsystematic risk through diversification. b. Portfolio theory, as initially developed by Markowitz (1952), assumes that the returns from investments are normally distributed. c. Beta is calculated by finding the covariance between the return on the asset and the return on the market and dividing it by the variance of the return on the market. d. A well-diversified portfolio should have a beta significantly less than one.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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