17, Systematic risk is all the risk that matters to a well-diversified investor A. True. B. False. 18. For a two-stock portfolio, the maximum reduction in risk occurs when the correlation coefficient between the two stocks is: A. 1 B. 0.5 C. 0 19. You are considering the following stocks: Stock Standard Deviation of Return 37% 31% 41% Beta 1.39 1.02 1.19 Which security has the highest expected return? A. Security Z because it has the largest standard deviation. B. Security X because it has the largest beta coefficient. C. Security Z because it has a highest ratio of standard deviation to beta. D. Security Y because it has the lowest beta coefficient and therefore the lowest risk. E. It is not possible to tell, given the information above. 20. A mutual fund manager expects his portfolio to earn a rate of retum of 11% this year. The beta of his portfolio is 0.6. The risk-free rate is 4%, and the market risk premium is 10%. Should you invest in this mutual fund? A. Invest; expected return is greater than required return given its risk. B. Don't invest; return is high relative to the risk. C. Invest; expected return is less than required return given its risk. D. Don't invest; return is low relative to the risk E. Cannot be determined based on this information