A Completely Diversified Portfolio Would Have a Correlation with the Market

question 74

Multiple Choice

A completely diversified portfolio would have a correlation with the market portfolio that is

• A) Equal to zero because it has only unsystematic risk.
• B) Equal to one because it has only systematic risk.
• C) Less than zero because it has only systematic risk.
• D) Less than one because it has only unsystematic risk.
• E) Less than one because it has only systematic risk.

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Definitions:

Partial Reinforcement

In behavioral psychology, this refers to a conditioning schedule where only some of the responses are followed by a reward, making a behavior more resistant to extinction.

Unpredictable Occasions

Events or situations that occur without forewarning and cannot be anticipated based on prior experience or knowledge.

Pigeon

A bird of the family Columbidae, known for its ability to find its way home over long distances.

Associative Learning

The process by which an association between two stimuli or a behavior and a stimulus is learned.