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Which statement regarding diversified portfolios is not true

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Reference no: EM133010430

Problem 1: Which of the following statements regarding the capital asset pricing model (CAPM) is NOT true?

A) Under the CAPM, beta captures an asset's exposure to firm-specific risk.

B) Under the CAPM, investors are compensated for bearing market risk.

C) Under the CAPM, a higher beta corresponds to a higher required rate of return.

D) Under the CAPM, beta determines the required return in excess of the risk-free rate.

Problem 2: Which of the following statements regarding diversified portfolios is NOT true?

A) The standard deviation of a portfolio's returns is the weighted average of the standard deviation of the assets in the portfolio.

B) The return on a portfolio is equal to the weighted average of the return of assets in the portfolio.

C) The extent to which a diversified portfolio reduces risk is greatest when assets in the portfolio have a low or negative correlation.

D) Most investors hold a portfolio of investments.

Reference no: EM133010430

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