The standard deviations of the two companies A and B are respectively 10% and 15%. If the two companies are totally independent from each other (zero correlation), what would be the standard deviation of an equally-weighted portfolio with these two companies?

9%. 11%. 12.5%. 13%.

The lower the Beta of a portfolio is,

The higher is its unsystematic (specific) risk. The higher is its systematic risk. The higher is its market value. The higher is the market return. None of the above.

The total risk of a portfolio can be decomposed in two parts: Systematic (undiversifiable) risk and specific (diversifiable) risk. The effect of diversification is:

Reduction of systematic and specific risks. Reduction of systematic risk and no impact on specific risk. No impact on systematic risk and reduction of specific risk. No impact on any kind of risk