1. The systematic risk of all the companies listed on the S&P 500 should equal to each other since all 500 companies listed on the index are based in the U.S. and thus face the same macroeconomic conditions.
True
False
2. You invested an equal dollar amount in three stocks (A,B, and C) to create a portfolio. The expected returns of stocks A-C are 10%, 12%, and 4%, respectively. The beta of stocks A-C are 1.1, 1.2, and .6, respectively. The return on the market portfolio is 9%. Based on this information, which of the following situations is true?
Your portfolio is inefficient as compared to the market portfolio.
Your portfolio has less systematic risk than the market portfolio.
Your portfolio has more systematic risk than the market portfolio.
The expected return for your portfolio is greater than the expected return of the market portfolio.