We Can Reduce Volatility by Investing in Less Than Perfectly

question 74

Multiple Choice

We can reduce volatility by investing in less than perfectly correlated assets through diversification because the expected return of a portfolio is the weighted average of the expected returns of its shares, but the volatility of a portfolio

• A) depends on the expected return.
• B) is higher than the weighted average volatility.
• C) is less than the weighted average volatility.
• D) is independent of weights in the shares.

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