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### The term excess-return refers to ______.

the difference between the rate of return earned on a particular security and the rate of return earned on other securities of equivalent risk

###
Some diversification benefits can be achieved by combining securities in a portfolio as long as the correlation between the securities is ________.

A. 1

B. less than 1

C. between 0 and 1

D. less than or equal to 0

B. less than 1

### If an investor does not diversify their portfolio and instead puts all of their money in one stock, the appropriate measure of security risk for that investor is the _____.

stock's standard deviation

### If you want to know the portfolio standard deviation for a three stock portfolio you will have to

calculate three covariances.

###
Which of the following correlations coefficients will produce the least diversification benefit?

A. -0.6

B. -0.3

C. 0

D. 0.8

D. 0.8

###
You are considering adding a new security to your portfolio. In order to decide whether you should add the security you need to know the security's _______.

I. expected return

II. standard deviation

III. correlation with your portfolio

Choose the correct roman numerals.

I, II, and III are all correct

###
risk that can be eliminated through diversification is called _______ risk.

A. unique

B. firm-specific

C. diversifiable

D. all of the above

D. all of the above

### An investor's degree of risk aversion will determine his/her ___________.

optimal mix of the risk-free asset and risky asset

### Consider an investment opportunity set formed with 2 securities that are perfectly negatively correlated. The global minimum variance portfolio has a standard deviation that is always ___________.

zero