In the CAPM, an asset that is part of a portfolio increases or decreases the variance of that portfolio by an amount that is equal to...

Question 2 options:

	The variance of the asset plus the variance of the portfolio
	The variance of the asset
	The variance of the asset plus the covariance of the asset with the portfolio
	The covariance of the asset with the portfolio

In the CAPM, investors must choose a set of portfolio weights that...

Question 3 options:

	minimizes their utility
	maximizes their expected return
	minimizes their variance
	maximizes their utility

Two firms have the same beta, but firm A has higher total risk compared to firm B. According to the CAPM, which of the following is true?

Question 13 options:

	Firm A will have a lower expected return compared to firm B, since its systematic risk is lower
	Firm A must have a higher expected return compared to firm B, since total risk is greater
	Firm A and firm B must have the same expected return, since they both have the same systematic risk
	Firm A will have a lower expected return compared to firm B, since its idiosyncratic risk is higher