For a Two-Stock Portfolio, the Maximum Reduction in Risk Occurs

question 33

Multiple Choice

For a two-stock portfolio, the maximum reduction in risk occurs when the correlation coefficient between the two stocks equals

• A)+1.0.
• B)-0.5.
• C)-1.0.
• D)0.0.

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Definitions:

Gradual Emancipation

A legal process through which the emancipation of slaves was made to occur slowly over a period of time, rather than immediately.

Legislature Abolished

The disbandment or termination of a legislative body, which is an assembly with the authority to make, amend, and repeal laws.

Slavery

A socio-economic system in which individuals are owned by others, forced to work without pay, and considered legal property.

Dominant Elite

The dominant elite describes a small group of individuals or entities that hold significant power, wealth, or influence over a larger population or a specific area of society or economy.