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2. What is a diversified portfolio? What type of risk is reducedthrough diversification? How many securities are necessary toachieve this reduction is risk? What characteristics must thesesecurities are necessary to achieve this reduction in risk ?whatcharacteristics must these securities possess? 7.what is beta coefficient ? what do beta coefficient of 0.5,1.0 and 1.5 mean ?8. If the correlation coefficient for a stock and the marketequals 0 , what is the market risk associated with the stock?9. How are the capital market line and the security market linedifferent? What does each represent ?10. How does arbitrage pricing theory advance our understandingof security returns?
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