Which of the Following Statement(s) Is(are) True Regarding the Variance

question 78

Multiple Choice

Which of the following statement(s) is(are) true regarding the variance of a portfolio of two risky securities?I) The higher the coefficient of correlation between securities, the greater the reduction in the portfolio variance.II) There is a linear relationship between the securities' coefficient of correlation and the portfolio variance.III) The degree to which the portfolio variance is reduced depends on the degree of correlation between securities.

• A) I only
• B) II only
• C) III only
• D) I and II
• E) I and III

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Definitions:

Market Share

The portion of a market controlled by a particular company or product.

Fiscal Year

A 12-month period used for accounting purposes and preparing financial statements, not necessarily coinciding with the calendar year.

Sales

The activity or business of selling products or services.

Partnership

A sanctioned business arrangement in which two or more persons co-manage and equally divide profits.