A Completely Diversified Portfolio Would Have a Correlation with the Market

question 74

Multiple Choice

A completely diversified portfolio would have a correlation with the market portfolio that is

• A) Equal to zero because it has only unsystematic risk.
• B) Equal to one because it has only systematic risk.
• C) Less than zero because it has only systematic risk.
• D) Less than one because it has only unsystematic risk.
• E) Less than one because it has only systematic risk.

---

Definitions:

Corporate Powers

Legal authorities and capacities granted to a corporation by law, including entering into contracts, owning assets, and issuing stock.

Businessperson

An individual actively involved in the business world, especially in activities related to operating, managing, or investing in businesses.

Contract

A legally enforceable agreement between two or more parties that creates mutual obligations.

Investor

An individual or entity that allocates capital with the expectation of achieving a financial return, often by purchasing securities, real property, or other investment vehicles.