21. Portfolio A has but one security, while Portfolio B has 100
securities. Because of diversification effects, we would expect
Portfolio B to have the lower risk. However, it is possible for
Portfolio A to be less risky.
True or False
22. The realized return on a stock portfolio is
the weighted average of the expected returns on the stocks in the
portfolio.
True or False
23. The price sensitivity of a bond to a given change in
interest rates is generally greater the longer the bond's remaining
maturity.
True or False
24. The tighter the probability distribution of its
expected future returns, the greater the risk of a given investment
as measured by its standard deviation.
True or False
25. Sinking funds are provisions included in bond indentures
that require companies to retire bonds on a scheduled basis prior
to their final maturity. Many indentures allow the company to
acquire bonds for sinking fund purposes by either (1) purchasing
bonds on the open market at the going market price or (2) selecting
the bonds to be called by a lottery administered by the trustee, in
which case the price paid is the bond's face value.
True or False
