1. Your stock investments return 8%, 12%, and -4% in consecutive years.

What is the sample standard deviation of the above returns?

Using the standard deviation and mean that you just calculated, and assuming a normal probability distribution, what is the probability of losing 3% or more?

2. Which of the following is correct?

A.Diversification reduces common and independent risks.

B.Diversification is a way of spreading risk across investments, rather than actually reducing risk.

C.Diversification eliminates risk unique to a particular stock.

D.Diversification is not useful for the average investor.