Worksheet of True/False:
1. In the statement, "The best measure to use when comparing alternative investments is the amount of the original investment.", changing "original investment" to "dollar gain or loss" would result in the statement being True.
True or False?
2. In the statement, "With holding periods of less than a year, annualizing the HPR makes it smaller.", changing "less" to "more" would result in the statement being True.
True or False?
3. In the statement, "The higher the correlation coefficient between two stocks, the greater will be the benefit from diversifying by combining the two stocks in a portfolio.", changing "higher" to "lower" would result in the statement being True.
True or False?
4. In the statement, "Based on the period 1950 – 1999, you would have the less uncertainty about any expected return on small company stocks than you would about the expected return on 3-month T-Bills.", changing "3-month T-Bills" to "large company stocks" would result in the statement being True.
True or False?
5. In the statement, "Our author discusses the average return and standard deviation for 3 different assets for the period 1950 – 1999.", changing "3" to "4" would result in the statement being True.
True or False?
6. In the statement," ”Diversifiable” risk, “Company-specific” risk, “Systematic” risk and “Market” risk all refer to the same type of risk.", changing "Systematic" to "Unsystematic" would result in the statement being True.
True or False?
7. In the statement, "By diversifying you can eliminate most or all of Systematic risk.", changing "Systematic" to "Unsystematic" would result in the statement being True.
True or False?
8. In the statement, "The variance is the square root of the standard deviation.", switching "variance" and "standard deviation" would result in the statement being True.
True or False?
9. In the statement, "A stock with one-half the average market risk would have a value for beta of 2.0.", changing "2.0" to "0.5" would result in the statement being True.
True or False?
10. In the statement, "The only variable on the right-hand side of the CAPM formula that varies from one company to another is the risk-free rate.", changing "risk-free rate" to "expected return on the market" would result in the statement being True.
True or False?
11. In the statement, "In order to properly evaluate a stock, investors need only consider its risk premium.", changing "risk premium" to "risk" would result in the statement being True.
True or False?
12. In the statement, "Investors should always choose stocks with the lowest reward-risk ratio.", changing "lowest" to "highest" would result in the statement being True.
True or False?
13. In the statement, "To find the standard deviation, we take the square root of the sum of the deviations of each observation from the mean of the observations.", changing "deviations" to "squared deviations" would make the statement True.
True or False?
14. In the statement, "When working with the entire population of observations, the denominator of the variance calculation is (n -1).", changing "(n - 1)" to "n" would result in the statement being True.
True or False?
15. In the statement, "Ceteris paribus, higher standard deviations represent lower risk.", changing "higher" to "lower" would result in the statement being True.
True or False?