Combining Negatively Correlated Assets Having the Same Expected Return Results

question 133

Multiple Choice

Combining negatively correlated assets having the same expected return results in a portfolio with__________level of expected return and __________level of risk.

• A) the same; a higher
• B) the same; a lower
• C) a higher; a lower
• D) a lower; a higher

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Definitions:

Paid-In Capital

the amount of money that a company receives from issuing stock to investors, reflecting the capital invested by shareholders.

Fair Market Value

The price at which property would sell on the open market between a willing buyer and a willing seller.

Noncumulative Nonparticipating

Refers to a type of preferred stock that does not allow for the accumulation of unpaid dividends if they are not declared by the board, nor does it participate in the extra profits of the company.

Cash Dividends

Payments made to shareholders out of a corporation's earnings in the form of cash.