For each question pick the most reasonable response based on the information provided. A1. Portfolio leveraging refers to which one of the following strategies? a) Borrowing funds at a riskfree rate of return and investing these funds in a risky security. b) Borrowing funds at a riskfree rate of return and investing these funds in a riskfree security. c) Borrowing funds at a risky rate of return and investing these funds in a risky security. d) Borrowing funds at a risky rate of return and investing these funds in a riskfree security. A2. Short selling a risky security refers to which one of the following strategies? a) Borrowing and selling the security when you expect its price to rise in the future. b) Borrowing and selling the security when you expect its price to fall in the future. c) Lending and selling the security when you expect its price to rise in the future. d) Lending and selling the security when you expect its price to fall in the future. A3. Two securities that have the same expected returns and standard deviation of returns would offer diversification benefits to investors under what condition? a) Never. b) Only if their returns are perfectly negatively correlated. c) Only if their returns are less than perfectly positively correlated. d) Only if their returns are perfectly positively correlated. A4. Stock A has an expected return of 6% and a standard deviation of returns of 15% while Stock B has an expected return of 8% and a standard deviation of returns of 25%. If the stocks are perfectly negatively correlated the expected return on the minimum variance portfolio consisting of these stocks is: a) 6.75%. b) 7.00%. c) 20.00%. d) Not computable because there is not enough information given.