Which of the Following Portfolios Has the Least Reduction of Risk

question 30

Multiple Choice

Which of the following portfolios has the least reduction of risk?

• A) A portfolio with securities all having positive correlation with each other.
• B) A portfolio with securities all having zero correlation with each other.
• C) A portfolio with securities all having negative correlation with each other.
• D) A portfolio with securities all having skewed correlation with each other.

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Definitions:

Bankruptcy

A legal proceeding involving a person or business that is unable to repay outstanding debts. The process begins with a petition filed by the debtor, which is most common.

Financial Management

The strategic planning, organizing, directing, and controlling of financial activities such as procurement and utilization of funds to achieve organizational goals.

Cash Flows

The total amount of money being transferred into and out of a business, often analyzed for evaluating the liquidity, flexibility, and overall financial health of the entity.

Cash-flow Management

The process of monitoring, analyzing, and adjusting a business's cash inflows and outflows, ensuring liquidity and operational stability.