In Order to Completely Eliminate the Risk (I

question 1

Multiple Choice

In order to completely eliminate the risk (i.e., a portfolio standard deviation of zero) in a two-asset portfolio, the correlation coefficient between the securities must be ____.

• A) less than +1.0
• B) equal to 0.0
• C) less than 0.0
• D) equal to -1.0

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Definitions:

Contrast Assumption

A principle in cognitive and perceptual psychology that the human brain perceives objects as distinct from their background based on differences in color, light, shape, or other aspects.

Unfamiliar Object

Something that is not recognized or known because it has not been previously seen, heard, or experienced.

Enhance Memory

Describes methods or techniques intended to improve or increase one's ability to store and recall information.

Rehearsal

A cognitive process involving the repetition of information to maintain it in short-term memory or to encode it for long-term memory.