5 Written questions
5 Matching questions
 42. A measure of the riskiness of an asset held in isolation is _____________.
a. Beta
b. Standard deviation
c. Covariance
d. Semivariance  37. The expected return on the optimal risky portfolio is __________.
a. 17%
b. 15%
c. 18%
d. 16%  31. The standard deviation of return on investment A is .10 while the standard deviation of return on investment B is .04. If the correlation coefficient between the returns on A and B is .50, the covariance of returns on A and B is __________.
a. .0447
b. .0020
c. .0020
d. .0447  44. The part of a stock's return that is systematic is a function of which of the following variables?
I. Volatility in excess returns of the stock market
II. The sensitivity of the stock's returns to changes in the stock market
III. The variance in the stock's returns that is unrelated to the overall stock market
a. I only
b. I and II only
c. II and III only
d. I, II and III  21. Suppose that a stock portfolio and a bond portfolio have a zero correlation. This means that
a. The returns on the stock and bond portfolio tend to move inversely
b. The returns on the stock and bond portfolio tend to vary independently of each other
c. The returns on the stock and bond portfolio tend to move together
d. The covariance of the stock and bond portfolio will be positive
 a D. 16%
 b B. Standard deviation
 c B. The returns on the stock and bond portfolio tend to vary independently of each other
 d B. .0020
 e B. I and II only
5 Multiple choice questions
 A. Asset allocation, stock selection
 C. 0.0
 B. All fall on the line of best fit; negative slope
 C. Correlation coefficient between ACE and the market has risen
 C. Equal to 0
5 True/False questions

1. Risk that can be eliminated through diversification is called ______ risk.
a. Unique
b. Firmspecific
c. Diversifiable
d. All of the above → B. Negatively correlated 
13. Beta is a measure of __________.
a. Firm specific risk
b. Diversifiable risk
c. Market risk
d. Unique risk → C. Market risk 
32. Consider two perfectly negatively correlated risky securities, A and B. Security A has an expected rate of return of 16% and a standard deviation of return of 20%. B has an expected rate of return 10% and a standard deviation of return of 30%. The weight of security B in the global minimum variance is __________.
a. 10%
b. 20%
c. 40%
d. 60% → C. Equal to 0 
29. The standard deviation of return on investment A is .10 while the standard deviation of return on investment B is .05. If the covariance of returns on A and B is .0030, the correlation coefficient between the returns on A and B is __________.
a. .12
b. .36
c. .60
d. .77 → C. 21.4% 
86. Which stock is riskier to a nondiversified investor who puts all his money in only one of these stocks?
a. Stock A is riskier
b. Stock B is riskier
c. Both stocks are equally risky
d. You cannot tell from the information given → A. Stock's standard deviation