Question 1
Investors are rewarded for assuming
◦ total risk.
◦ diversifiable risk.
◦ nondiversifiable risk.
◦ any type of risk.
Question 2
Modern portfolio theory does not consider diversifiable risk relevant because
◦ it is easy to eliminate.
◦ it is impossible to eliminate.
◦ its effects are unpredictable.
◦ its effects are too small to make a difference in portfolio returns.