(%)   a. W 15 36 b. X 12 15 c. Z 5 7 d. Y 9 21   22. Which statement about portfolio diversification is correct? a. Proper diversification can reduce or eliminate systematic risk. b. Diversification reduces the portfolios expected return because it reduces a portfo- lios total risk. c. As more securities are added to a portfolio, total risk typically would be expected to fall at a decreasing rate. d. The risk-reducing benefits of diversification do not occur meaningfully until at least 30 individual securities are included in the portfolio. 23. The measure of risk for a security held in a diversified portfolio is: a. Specific risk. b. Standard deviation of returns. c. Reinvestment risk. d. Covariance. 24. Portfolio theory as described by Markowitz is most concerned with: a. The elimination of systematic risk. b. The effect of diversification on portfolio risk. c. The identification of unsystematic risk. d. Active portfolio management to enhance return. 25. Assume that a risk-averse investor owning stock in Miller Corporation decides to add the stock of either Mac or Green Corporation to her portfolio. All three stocks offer the same expected return and total risk. The covariance of return between Miller and Mac is .05 and between Miller and Green is .05. Portfolio risk is expected to: a. Decline more when the investor buys Mac. b. Decline more when the investor buys Green. c. Increase when either Mac or Green is bought. d. Decline or increase, depending on other factors. 26. Stocks A, B, and C have the same expected return and standard deviation. The follow- ing table shows the correlations between the returns on these stocks.     Stock A Stock B Stock C   Stock A 1.0 Stock B 0.9 1.0 Stock C 0.1 0.4 1.0