Question: 5. What is the most likely correlation coefficient between a stock index mutual fund and the S&P 500? A. -1.0 B. 0.0 C. 1.0 D.

5. What is the most likely correlation coefficient between a stock index mutual fund and the S&P 500? A. -1.0 B. 0.0 C. 1.0 D. 0.5 6. The purpose of diversification is to do which of the following? a. Increase the expected risk premium b. Reduce the portfolio's unsystematic risks C. Reduce the beta of the portfolio to zero d. Increase the security's risk premium e. Reduce the portfolio's systematic risk level 7. Which of the following is/are true: (Circle your choice(s). You may choose more than one.) A. Diversification can reduce standard deviation. B. Diversification can eliminate unsystematic risk. C. Diversification can reduce the level of systematic risk. 8. Given that investors can diversify, which of the following risks is irrelevant? (In other words, which risk does not matter?) a. Non-diversifiable risk b. Unsystematic risk C. Market risk d. Systematic risk e. All risks are always relevant

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