mark all of the following statements that you believe to be true and leave unmarked those that are false. You will receive partial credit for this question, i.e., two points for each statement you correctly mark or correctly leave unmarked. 1. The realized return of a stock is the relative change in value an investor would have received in a given period due to capital gains and dividends. 2. Empirical stock market data shows that, historically, the average return of a single stock is linearly related to the volatility of its return. 3. The statistical explanation for the diversification of risk in a stock portfolio is that as the correlation between the returns of the portfolio components decreases, the probability that the returns move in opposite directions increases, reducing the volatility of the portfolio return. 4. The economic explanation for the diversification of risk in a stock portfolio is that the systematic risks of individual stocks are weighted by their portfolio weights, which reduces the overall risk of the portfolio. 5. According to the portfolio selection theory (PST), on a capital market where risky and risk-free investment / funding are possible, only the efficient / tangent portfolio is held by any rational, risk-averse investor. The efficient / tangent portfolio is the risky portfolio that maximizes the Sharpe ration, i.e., the average portfolio return in excess of the risk-free rate per unit of risk, as measured by the volatility of the portfolio return