1. Lower (less positive and more negative) the correlation between asset returns, ________.

1) lesser the potential diversification of risk

2) greater the potential diversification of risk

3) lower the potential profit

4) lesser the assets have to be monitored

2. What is the yield-to-maturity for a 10 year $1000 bond paying 30 dollars every six months if the bond costs $950?

a) -.0805

b) -.0563

c) .0669

d) .0691