The Only Condition Under Which Risk Can Be Reduced to Zero

question 28

True/False

The only condition under which risk can be reduced to zero is to find securities that are perfectly negatively correlated (r = −1.0) with each other.

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Definitions:

Credit Policy

The guidelines a company follows to determine credit terms for customers, including payment period, interest rates, and the criteria for extending credit.

Delayed Credit

A bookkeeping entry signifying credits that will be applied to a customer's account at a future date, affecting future billing cycles rather than immediate revenues.

Delayed Charge

A transaction that records an expenditure which will be billed to a client or customer at a future date, not immediately impacting cash flow.

Pending Expense

Expenditures that have been incurred but not yet fully processed or paid out.