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Part II. Solve the following problems (Show your work if you look for partial credit). (55 Points)

Bonues2: (2’) Are the following true or false? Explain. Stocks with a beta of zero offer an expected rate of return of zero. The CAPM implies that investors require a higher return to hold highly volatile securities.  

2. (5′) Two investment advisers are comparing performance. One averaged a 19% return and the other a 18% return. However, the beta of the first adviser was 1.5, while that of the second was 1.2.  a. Can you tell which adviser was a better selector of individual stocks (aside from the issue of general movements in the market)? Why? b. If the T-bill rate were 5% and the market return during the period were 15%, calculate Jensen’s Alpha. Point out whether these two investments are underpriced or overpriced. Which adviser would be the superior stock selector?

Existing research supports the complementary needs theory more than it does the attraction similarity theory.

Individuals ___________ on extraversion can easily experience a ___________ mood after an experimental manipulation.

Which of the following is NOT one way personality can influence your social environment as we discussed in class?

Refusing to talk until others agree to comply is an example of

Individuals HIGH on the trait of openness tend to engage in which of the following manipulation tactics?

Individuals who score highly on the trait of Machiavellianism tend to

Your personality influencing your choices for your environment and friends is an example of