Instructions: Write the answers in the blanks provided or in the spaces below each question. You may expand the spaces for more space, but your answers must be hand-written. All math questions must have work included. A big part of your grade will depend on whether or not you answered ALL of the parts of each question. So I will grade both for participation and accuracy. If you are not sure of an answer, try to include a reasonable answer for each question. Once again, answer ALL parts to all questions. You may attach or include additional pages with your work but keep everything in order. 1. What is the difference between correlation coefficients between two stocks and the covariance between two stocks? Hypothetically, if I have an equally weighted portfolio between two stocks what would be the best possible correlation coefficient from a diversification standpoint? What type of risk would be diversified and what type of risk would not be diversified