The Benefits of Portfolio Diversification Are Highest When the Individual

question 7

Multiple Choice

The benefits of portfolio diversification are highest when the individual securities have returns that:

• A)vary directly with the rest of the portfolio.
• B)vary indirectly with the rest of the portfolio.
• C)are uncorrelated with the rest of the portfolio.
• D)are countercyclical.

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Definitions:

Retirement Plans

Financial arrangements designed to replace employment income upon retirement, which may include pensions, savings plans, and government benefits.

Bonuses

Additional financial compensation awarded to employees as an incentive for superior performance, achievement of targets, or as part of profit-sharing arrangements.

Organization's Goals

The specific measurable outcomes that an organization aims to achieve within a certain timeframe, guiding its operations and strategic planning.

Group Bonuses

Financial rewards given to a team or group of employees for achieving defined objectives or targets.