Q1. For a portfolio decision of chapter 11, the first step is to choose a risky portfolio, and the second step is to determine the best combination of the risky portfolio and risk free asset. Consider the choice of a risky portfolio in the first step by four identical investors except for risk aversion. In equilibrium, a. more risk tolerant investors will choose a risky portfolio with the higher expected return O b. rsk aversion here is one of the key factors that determine the choice of a risky portfolio O c. uncertain O d. risk aversion is irrelevant in this choice of a risky portfolio O e. more risk averse investors will choose a risky portfolio with less risk Q2. Based on historical data, one can conclude that most stock returns are serially most firms are to the market portfolio. and stock return of O a. negatively correlated, positively correlated O b. positively correlated, positively correlated Oc. none of the above O d. uncorrelated, uncorrelated O e. positively correlated, negatively correlated Of. negatively correlated, negatively correlated