You purchased two stocks that are perfectly negatively correlated.
A) Your portfolio is well diversified, so you should face no risk whatsoever.
B) Even though you diversified the idiosyncratic risk away, your portfolio is still affected by systemic risks like a stock market crash.
C) Even though you diversified the systemic risk away, your portfolio is still affected by idiosyncratic risks like a stock market crash.
D) Your portfolio is not diversified; thus you face no systemic risk.
Question 2
When insurance companies offer fair insurance,
A) risk-averse agents always purchase it.
B) risk-neutral agents never purchase it.
C) risk-loving agents always purchase it.
D) nobody would purchase fair insurance.
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