Which of the Following Involves the Interrelationship Between Security Returns

question 55

Multiple Choice

Which of the following involves the interrelationship between security returns as well as the expected returns and variances of those returns?

• A) Random diversification
• B) Correlating diversification
• C) Friedman diversification
• D) Markowitz diversification

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Definitions:

Average Accounting Return

A financial metric that calculates the average profits earned on investments relative to the book value of assets over a certain period.

Mutually Exclusive Investments

Investment options where the choice of one option precludes the selection of another, requiring careful analysis to determine the most beneficial choice.

Incorrect Decisions

Decision-making instances that lead to unfavorable outcomes or failures due to errors in judgement, analysis, or implementation.

Target AAR

Target Average Annual Return (AAR) is a financial goal or benchmark for the average yearly return on an investment.