Question 1
The graph below shows the feasible set of risks and returns for portfolios of two assets. What is the correlation of the two assets?

◦ -1
◦ 0
◦ +1
Question 2
Which of the following is a characteristic of unsystematic risk?
◦ Affects one or a few firms
◦ Includes events like oil price shocks
◦ Cannot be reduced though diversification
◦ Is the only risk that investors in the market portfolio worry about