When Two Risky Securities That Are Positively Correlated but Not

question 15

Multiple Choice

When two risky securities that are positively correlated but not perfectly correlated are held in a portfolio,

• A)the portfolio standard deviation will be greater than the weighted average of the individual security standard deviations.
• B)the portfolio standard deviation will be less than the weighted average of the individual security standard deviations.
• C)the portfolio standard deviation will be equal to the weighted average of the individual security standard deviations.
• D)the portfolio standard deviation will always be equal to the securities' covariance.

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Definitions:

Photosynthesis

A process used by plants and other organisms to convert light energy, usually from the sun, into chemical energy that can be used to fuel the organism's activities.

Ecosystems

Complex communities of organisms and their physical environment interacting as an ecological unit in nature.

Food Chains

A hierarchy of organisms each dependent on the next as a source of food, illustrating the flow of energy and nutrients.

Chlorophyll

A pigment found in plants and algae that's critical for photosynthesis, allowing them to absorb light energy.