1.What is meant by diversification, and how does it relate to common versus independent risk? (Be meticulous and specific in the answer).

2.What is the difference between systematic and unsystematic risk?

3.Consider the following six monthly returns:

5% -2% -8% 10% -1% 11%

a.Calculate the Arithmetic average return over this period and express your answer as a percentage per month.

b.Calculate the monthly variance over this period(Show calculation).

c.Calculate the monthly standard deviation over this period(Show Calculations).

4.You bought a stock one year ago for $155 per share and sold it today for $260 per share. It paid a $1.20 per share dividend today.

a. What was your realized return?(Show Calculations)

b. How much of the return came from dividend yield?(Show Calculations)

c. How much came from capital gain?(Show Calculations)