Risk and Return

Risk and Return. True or false? Explain or qualify as necessary.
a. The expected rate of return on an investment with a beta of 2 is twice as high as the expected
rate of return of the market portfolio.
b. The contribution of a stock to the risk of a diversified portfolio depends on the market risk
of the stock.
c. If a stock's expected rate of return plots below the security market line, it is underpriced.
d. A diversified portfolio with a beta of 2 is twice as volatile as the market portfolio.
e. An undiversified portfolio with a beta of 2 is twice as volatile as the market portfolio.