4. Which of the following is true about the risk premium? 1) The risk premium has been higher for stocks than bonds in the US and Canadian Market historically. ii) The risk premium would be unchanged if geometric or arithmetic returns were used to calculate it. iii) The risk premium directly measures how stocks perform relative to inflation. iv) Assuming an asset's return stays constant, its risk premium is negatively related to the yield on T-bills. a) ii, iv b) i, iii c) i, iv d) None of the above 5. You are contemplating investing in two stocks ABC and XYZ that have an expected return of 12% and 9% respectively. If your target expected return from your portfolio is 10%, what should be the weight of your investment in ABC? a) 0.17 b) 0.33 c) 0.67 d) It cannot be determined from the information above 6. Which of the following is true? i) If the correlation between two assets is +1, then a portfolio combining these two assets will have a standard deviation that is greater than the weighted average of the two individual standard deviations 11) The unsystematic risk of an asset can be diversified away. iil) To capture a diversification benefit, the correlation between two assets must be less than 0. iv) If the correlation between two assets is less than -1, arbitrage opportunities (reward without risk) are available. a) i, ii b) ii, iii d) iii, iv