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Assume You Are Considering Combining Two Investments to Form a Portfolio

question 52

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Assume you are considering combining two investments to form a portfolio and you are very concerned with the risk that will result from the combination.If you want to attain the greatest effect from diversification, you would prefer that the assets are related.


Definitions:

Variable Resources

Inputs that change in quantity with levels of production, such as raw materials and labor.

Variable Cost

Costs that change in proportion to the level of goods or services that a business produces.

ATC

Average Total Cost, which is the sum of all production costs divided by the quantity of output produced.

MC

Marginal Cost, the change in total production cost that comes from making or producing one additional unit.

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