If the Returns of Two Assets Are Perfectly Positively Correlated

question 50

Multiple Choice

If the returns of two assets are perfectly positively correlated, an investor who puts half of his/her savings into each will:

• A) reduce risk.
• B) have a higher expected return.
• C) not gain from diversification.
• D) reduce risk but lower the expected return.

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Definitions:

Sales Growth

The increase in sales over a specific period, indicating the performance and expansion potential of a business.

Planner's Assumptions

Fundamental assumptions made by planners about the future conditions and variables that will affect project outcomes or business conditions.

Implied Hypothesis

An unstated hypothesis thought to influence a situation or experiment's outcome indirectly.

Null Hypothesis

A hypothesis that assumes no significant difference or effect in a study, which researchers seek to test against the alternative hypothesis.