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6. Which of the following statements concerning the standard deviation of returns are correct? I. The greater the standard deviation, the lower the risk. II. The standard deviation is a measure of return variation. 111. The higher the standard deviation, the higher the risk. IV. The higher the standard deviation, the higher the return. a. I and III only b. 11. III and IV only c. 1. III, and IV only d. I. II, and III only e. I. II, III, and IV 7. Which of the following statements are correct concerning diversifiable risk? 1. Diversifiable risk can be essentially reduced by investing in less related securities. 11. The market rewards investors for diversifiable risk by paying a risk premium. III. Diversifiable risk is generally associated with an individual firm. IV. Beta of a stock measures diversifiable risk. a. I and III only b. II and IV only c. I and IV only d. II and III only e. I, II, and III only 8. Recalling the meaning and calculation of beta, the market portfolio (e.g., the S&P 500 index) would have a beta of a. -1 b. 0 c. +1 d. - 100 9. In the context of the Capital Asset Pricing Model (CAPM), the relevant measure of risk for calculating risk premium for a stock is a. diversifiable risk of the stock b. covariance of returns between the stock and the market portfolio c. standard deviation of returns for the stock d. variance of returns for the stock

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