For a Security to Help Diversify a Portfolio, the Asset​

question 13

Multiple Choice

For a security to help diversify a portfolio, the asset​

• A) ​must generate a greater return than the average return on the portfolio
• B) should not be sensitive to changes in security prices​
• C) ​should have a return that is negatively correlated with the return on other securities in the portfolio
• D) ​must be a debt instrument if the portfolio consists primarily of stocks

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Definitions:

Tutor

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Practical Wisdom

The ability to make the right judgment about what to do in a given situation; often associated with virtues and ethical living.

Aristotle

Ancient Greek philosopher and scientist, a student of Plato and teacher of Alexander the Great, known for his writings on physics, metaphysics, poetry, theater, music, logic, rhetoric, linguistics, politics, government, ethics, biology, and zoology.

Quandary Ethics

A framework for addressing ethical decisions that present a significant conflict of principles or values, leading to uncertainty on the right course of action.