1. If a stock portfolio is well diversified, then the portfolio standard deviation: (Select two from below.)

• A. will be equal to 1.
• B. will mostly reflect systematic risk.
• C. will be equal to or greater than the standard deviation of the most risky stock in the portfolio.
• D. will be greater than a weighted average of the standard deviation of the individual stocks in the portfolio.
• E. can be completely diversified away.
• F. will be smaller than a weighted average of the standard deviation of the individual stocks in the portfolio.

2. Which of the following are examples of undiversifiable risk? (Select two from below.)

• A. People become diet conscious and avoid fast food restaurants.
• B. The Federal Reserve suddenly increases interest rates.
• C. Airline pilots go on strike.
• D. The cold weather destroys Florida's citrus crop.
• E. A public health crisis caused by the coronavirus pandemic affects all industries in the economy.
• F. The price of lumber declines sharply.
• G. A fast-rising high tech company suddenly files for bankruptcy.
• H. Two major companies in the pharmaceutical industry announce merger.