Problem
1. Why is it reasonable to ignore diversifiable risk and care only about nondiversifiable risk? What about an investor who puts all of his money into only a single risky stock? Can he properly ignore diversifiable risk?
2. If we compare the betas of various investment opportunities, why do the assets that have higher betas also have higher average expected rates of return?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.