Reference no: EM131757651
TRUE/FALSE
1. A negative beta investment should have a return less than the risk-free rate.
2. A firm with a larger standard deviation will have a larger beta.
3. High rains can damage corn crops, and so the output from the individual fields is uncertain. This risk is almost completely diversifiable.
4. An oil exploration company drills one well in hopes of finding oil. The amount of oil from the well is uncertain, but that risk is almost completely diversifiable.
5. "The returns to new entrepreneurs and the stock market follows a "bell-shaped" distribution.
6. If I combine two diversified portfolios, the standard deviation of the resulting portfolio will be the average of the two diversified portfolios.
7. There can be both emotional and real dollar costs to surprise negative returns.
8. If a security return is normally distributed then 2/3 of the observed returns should fall within two standard deviations of the mean.
9. For risk-averse people, the certainty equivalent wealth will be less than the average wealth of a lottery.
10. Constant relative risk aversion implies that if people with a million dollars optimally invest half of their money in a risky security then people with $10,000 with the same risk aversion would invest half their money in the same risky security.
11. Under constant relative risk aversion, the lower the certainty equivalent wealth is than the average wealth of a lottery the riskier the lottery.