Fidelity large cap fund has a Sharp ratio of 0.7 and expected return of 18%. Fidelity small cap has a Sharpe ratio of 0.5 and expected return of 20%. Which fund should a risk-averse investor prefer if he/she likes to construct a portfolio using the risk-free and one of the funds?

A) Fidelity small cap B) Fidelity large cap C) Allocate 50% to each funds D) Only risk free asset E) None of the above 4 points

QUESTION 8 You own TSLA stock however you are concerned about volatility. So you decide to add another stock which has a correlation coefficient of 1 with TESLA. By doing so what kind of risk did you reduce? A. Market risk B. Company specific risk C. Unsystematic risk D. Inflation risk E. None of the above