Combining Perfectly, Positively Correlated Assets Will

question 10

Multiple Choice

Combining perfectly, positively correlated assets will

• A) increase the overall risk level of a portfolio.
• B) decrease the overall risk level of a portfolio.
• C) not change the overall risk level of a portfolio.
• D) increase or decrease the portfolio's risk depending on the risk of each single asset portfolio.

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Definitions:

Recessionary Gap

A situation where the real GDP is lower than the potential GDP, and the economy is producing below its capacity.

Income Tax Surcharge

An additional charge on the basic income tax liability, often applied to higher income brackets to collect additional revenue from them.

Federal Deficit

The amount by which the government's total budget outlays exceed its total receipts for a fiscal year.

Discretionary Fiscal Policy

Government policy involving deliberate manipulation of government spending and taxes to influence the economy based on current economic conditions.