Question 1
The objective of diversification in an investment portfolio is
◦ to make sure you do not have all your eggs in one basket.
◦ to eliminate non-systematic or company specific risk.
◦ to eliminate systematic portfolio risk.
◦ to hold a lot of strong growth stocks.
Question 2
Investing in Coke and Pepsico would be an example of
◦ highly correlated stocks.
◦ investing in stocks that were not correlated.
◦ diversifying by investing in both rather than one or the other.
◦ investing in international growth stocks.
