Suppose stocks offer an expected rate of returns of 10% with a standard deviation of 20%, and gold offers an expected return of 5% with a standard deviation of 25%. (i) If the correlation between gold and stocks is sufficiently low, gold ______ be held as a component in the optimal portfolio. (ii) If the correlation coefficient between gold and stocks is 1.0, then gold ______ be held as a component in the optimal portfolio.

Question 1 options:

A)	(i) will; (ii) will not

B)	(i) will not; (ii) will

C)	(i) will; (ii) will

D)	(i) will not; (ii) will not

Suppose GM (General Motors) has a beta equal to 1.1 and its stock returns standard deviation is 50%. Suppose GOOG (Google) has a beta equal to 2.2 and its stock returns standard deviation is 30%.

(i) If you want to include the less risky one into your well diversified portfolio, you will choose ___(i)___ .

(ii) If you want to include the less risky one to form your single-stock (i.e., undiversified) portfolio, you will choose ___(ii)___ .

Question 2 options:

A)	(i) GM; (ii) GM

B)	(i) GM; (ii) GOOG

C)	(i) GOOG; (ii) GM

D)	(i) GOOG; (ii) GOOG

Which one of the following combinations will tend to produce the highest rate of return according to the Fama-French three-factor model? Assume beta is constant in all cases.

Question 3 options:

A)	large market capitalization and high book-to-market ratio

B)	large market capitalization and low book-to-market ratio

C)	small market capitalization and high book-to-market ratio

D)	small market capitalization and low book-to-market ratio