1. The standard deviation of expected returns for investments X and Y equal 10.3% and 7.8%, respectively. The correlation between returns for X and Y is 0.30. How much risk reduction, that is diversification benefit in basis points, does the minimum risk portfolio provide?
a. 112 b. 134 c. 154 d. 178 e. 193
2. Dom and Suny, co-owners of a dry cleaning business, have finally built their "dream home" after many years of planning. Full replacement cost was their insurance choice for this home. An endorsement was added by the couple that will pay up to an additional 20 percent of the policy limit in circumstance that the cost of rebuilding the home after a loss comes in greater than the policy limit. The basis under which Dom and Suny insured their home is called
1. actual cash value.
2. valued policy coverage
3. extended replacement cost.
4. guaranteed replacement cost.