We May Not Be Able to Fully Remove Risk by Diversification

question 61

Multiple Choice

We may not be able to fully remove risk by diversification if:

• A) a completely risk-free asset does not exist.
• B) the asset returns in our portfolio are positively correlated.
• C) buying stock on margin is not allowed by financial regulators.
• D) none of the above

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Definitions:

Prozac

A brand name for fluoxetine, a widely prescribed antidepressant belonging to the selective serotonin reuptake inhibitor (SSRI) class.

Hopeless

A feeling or state of despair when an individual perceives no possible solutions or outcomes to a difficult situation.

Depressed

Feeling depressed commonly refers to experiencing a persistent feeling of sadness or loss of interest, which can impair daily functioning.

Antianxiety Drug

A medication or substance used to reduce or alleviate symptoms of anxiety.