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Question 1: What is the relation between risk and return for large portfolios of shares? (Choose the correct response.) A. There is an indirect relationship
Question 1: What is the relation between risk and return for large portfolios of shares? (Choose the correct response.) A. There is an indirect relationship between risk and return - the higher the risk, the lower the return. B. There is a direct relationship between risk and return - the higher the risk, the higher the return - but this relationship is not consistent. Some large portfolios earn a very high return for little extra risk, while others earn a small amount of extra return even though they carry considerable risk. C. There is a direct and proportional relationship between risk and return for large portfolios. Returns increase in a consistent manner with the level of risk. D. There is no clear relationship between risk and return for large portfolios. Question 2: Does systematic or unsystematic risk require a risk premium? Why? What risk requires a risk premium because it represents economy-wide risk that cannot be diversified away
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