A Portfolio Would Offer Maximum Diversification Benefits When _____

question 50

Multiple Choice

A portfolio would offer maximum diversification benefits when _____.

• A) the constituent stocks have a coefficient of correlation of 0
• B) the constituent stocks have a coefficient of correlation of +1
• C) the constituent stocks have a coefficient of correlation of -1
• D) the constituent stocks have a coefficient of variation of 0
• E) the constituent stocks have a coefficient of variation of -1

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Definitions:

Maintenance Fee

A periodic charge imposed by banks, credit unions, or HOAs to cover the cost of services or upkeep.

Compounds Interest Monthly

The process where the interest earned on an investment is calculated monthly and added to the principal sum, leading to an increase in the total amount of interest earned over time.

Compounded Monthly

The process of calculating interest on both the initial principal and the accumulated interest from previous periods on a monthly basis.

Simple Interest

Interest calculated only on the principal amount, or on that portion of the principal amount which remains unpaid.