QUESTION 4 A correlation coefficient of .068 would indicate that a 6.8% return would be earned with the investment the returns are virtually uncorrelated the risk of the investment portfolio is almost zero the returns are strongly (almost perfectly positively correlated QUESTION 5 The relevant risk measure for a diversified investor is the standard deviation variance coefficient of variation beta QUESTION 2 An agency problem can result when the manager is incompetent is unethical is ignorant any of the above QUESTION 3 A risk averse investor avoids risky investments seeks risky investments gains a psychological benefit from taking on riskier investments (psychic income) seeks the highest return given the risk level QUESTION 1 Which of the following fits the definition of an agency relationship? a firm uses an employment agency to acquire hourly laborers the firm's accountants submit the financial statements to the SEC, a quasi-government agency the firm hires a manager from the College of Business Administration the Central Intelligence Agency (CIA) investigates the company for fraud