1. Discuss how the correlation between the returns on two individual stocks can affect the risk of a portfolio that contains the two stocks. Discuss how this explains what happens when we diversify effectively.
2. A U.S. Treasury bill with 60 days to maturity is quoted at a discount yield of 1.50 percent. What is the bond equivalent yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)