Diversification is the most effectivewhen the correlation coefficient between two assets return is _________ .

A) positive

B) negative

C) +1

D) 0

E) -1

Based on investors relative degrees of risk aversion,

A) investors will hold varying amounts of the risky asset in their portfolios.

B) all investors will have the same portfolio asset allocations.

C) investors will hold varying amounts of the risk-free asset in their portfolios.

D) A and C.

E) none of the above.