In a Two-Security Minimum Variance Portfolio Where the Correlation Between

question 1

Multiple Choice

In a two-security minimum variance portfolio where the correlation between securities is greater than -1.0,

• A)the security with the higher standard deviation will be weighted more heavily.
• B)the security with the higher standard deviation will be weighted less heavily.
• C)the two securities will be equally weighted.
• D)the risk will be zero.

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Definitions:

Lacunae

Small cavities within bone or cartilage tissue that house cells.

Compact Bone

The dense, hard outer layer of bone that gives it strength and structure.

Inner Layer

Refers to the innermost layer or lining of an organ or structure, such as the mucosa in the stomach or intestines.

Osteoblasts

Cells that specialize in the formation of new bone tissue.