Which Three of the Following Statements Are Correct

question 26

Multiple Choice

Which three of the following statements are correct?

• A) For a portfolio to be described as efficient there must be no other combinations of proportions of the underlying investments which provide a higher return for the same risk.
• B) Portfolio returns are a weighted average of the expected returns on the individual investments but portfolio standard deviation is more than the weighted average risk of the individual investments.
• C) Both covariance and the correlation coefficient measure the degree to which returns move together.
• D) The degree of risk reduction from diversification depends on the extent of statistical interdependence between the returns of the different investments.

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Definitions:

Heritable Traits

Characteristics or features that are passed from one generation to the next through genes.

Environment

The surrounding conditions in which an organism operates, including natural, social, and cultural factors that affect its life.

IQ Test-takers

Individuals who undergo standardized assessments designed to measure human intelligence and cognitive abilities.

Heritability

The proportion of variation among individuals that can be attributed to genes.