When Returns Are Perfectly Positively Correlated, the Risk of the Portfolio

question 38

Multiple Choice

When returns are perfectly positively correlated, the risk of the portfolio is:

• A) zero.
• B) the weighted average of the individual security's risk.
• C) equal to the correlation coefficient between the securities.
• D) infinite.

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Definitions:

Hardness

A measure of a material's resistance to deformation, often assessed by indentation.

Chromium

A chemical element with symbol Cr, known for its hardness, high corrosion resistance, and ability to be polished to a high shine, often used in plating.

SAE

Society of Automotive Engineers, an international organization that sets standards for engineering professionals in various industries.

Brittleness

A material property indicating how easily it breaks or cracks under stress without significant deformation.