Combining Two Assets Having Perfectly Positively Correlated Returns Will Result

question 138

Multiple Choice

Combining two assets having perfectly positively correlated returns will result in the creation of a portfolio with an overall risk that

• A) decreases to a level below that of either asset.
• B) increases to a level above that of either asset.
• C) remains unchanged.
• D) stabilizes to a level between the asset with the higher risk and the asset with the lower risk.

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Definitions:

Orange Crop

The yield of orange trees harvested in a particular area during a single growing season.

Cold Spell

A period of unusually cold weather relative to the expected conditions for a certain time of year.

Supply

The total amount of a product or service available for purchase at any given time.

Equity Funds

Investment funds that primarily invest in stocks, aiming to provide investors with growth or income.