Question: Arbitrage Pricing Theory (40 points) Question 2.1: (10 points) Does a single stock or an index of stocks with an identical beta have more systematic

Arbitrage Pricing Theory (40 points) Question 2.1: (10 points) Does a single stock or an index of stocks with an identical beta have more systematic rink? Why? Question 2.2: (10 points) Show that is diversification incres (the weight in each security in the portfolio oes down the non systematic risk does down. Hint: (2) '() ()

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