How Can You Reduce the Level of Risk, Provided the Constituents

question 9

Multiple Choice

How can you reduce the level of risk, provided the constituents of a portfolio are not perfectly positively correlated?

• A) Decrease the number of securities
• B) Make the statistical interdependence between the securities more positive
• C) Identify high profit investments
• D) Increase the number of securities

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Definitions:

Liberia

A country on the West African coast, founded in the 19th century by freed American and Caribbean slaves as a colony for African-American resettlement.

Black Shipbuilder

Refers to an African American or an individual of African descent who is skilled in designing, constructing, and repairing ships.

Freetown

The capital city of Sierra Leone, founded as a home for repatriated African Americans and rescued slaves in the late 18th century.

Colonization

The process by which a country takes control of land and establishes its government, often resulting in the exploitation and displacement of indigenous populations.