1. Which of the following is not an example of factors that affect systematic risk? a) Changes in the general interest rates b) A firm wins a lawsuit dealing with patent infringement c) Our country declares war in the Persian Gulf d) Environmental awareness increases throughout the country 2. Which of the following statement is true? a) A stock with a beta of zero has a very low level of systematic risk. b) A stock with a beta greater than one has lower non-diversifiable risk than a stock with a beta of one. c) A stock with a beta less than one has lower non-diversifiable risk than a stock with a beta of one. d) A stock with a beta less than one has higher non-diversifiable risk than a stock with a beta of one.

3. Which of the following best measures the risk of holding an asset in isolation i.e. stand- alone risk? a) The mean covariance b) The standard deviation c) The coefficient of optimization d) The standard asset pricing model

4. Investment risk is a) The probability of achieving a return that is greater that what was expected b) The probability of achieving a beta coefficient that is less than what was expected. c) The probability of achieving a return that is less than what was expected d) The probability of achieving a standard deviation that is less than what was expected. 5. Which of the following statements is true? a) Systematic or market risk can be reduced through diversification. b) Both systematic and unsystematic risks can be reduced through diversification. c) Unsystematic or company risk can be reduced through diversification. d) Neither systematic nor unsystematic risk can be reduced through diversification.