1.

The goal of diversification under the traditional portfolio theory is to minimize:

Question 1 options:

	Systematic Risk
	Unsystematic Risk
	Beta

2.

Question 6 (1 point)

The value of a call option on a stock at expiration is:

Question 2 options:

	The greater of (1) zero and (2) the exercise price minus the stock price.
	The smaller of (1) zero and (2) the stock price minus the exercise price.
	The greater of (1) zero and (2) the stock price minus the exercise price.

3.

Which of the following statements is false?

Question 3 options:

	The risk premium for diversifiable risk is zero, so investors are not compensated for holding firm-specific risk.
	Over any given period, the risk of holding a stock is that the dividends plus the final stock price will be higher or lower than expected, which makes the realized return risky.
	Because investors can eliminate firm-specific risk "for free" by diversifying their portfolios, they will not require a reward or risk premium for holding it.
	Because investors are risk averse, they will demand a risk premium to hold unsystematic risk.

4.

A portfolio of securities with a correlation coefficient of 1 will most likely have:

Question 4 options:

	Systematic risk but no nonsystematic risk.
	Systematic as well as nonsystematic risk.
	Nonsystematic risk but no systematic risk.