A Completely Diversified Portfolio Would Have a Correlation with the Market

question 74

Multiple Choice

A completely diversified portfolio would have a correlation with the market portfolio that is

• A) Equal to zero because it has only unsystematic risk.
• B) Equal to one because it has only systematic risk.
• C) Less than zero because it has only systematic risk.
• D) Less than one because it has only unsystematic risk.
• E) Less than one because it has only systematic risk.

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Definitions:

Rational Organization

An approach to organizational management that emphasizes efficiency, predictability, calculability, and control through a structured and logical framework.

Bureaucracy

A system of government or business administration characterized by a hierarchy of authority, a clear division of labor, explicit rules, and impersonality in the application of rules.

Written Policies

Official documents that outline the principles, procedures, and guidelines by which an organization or government operates.

Domination

The exercise of power or control over others, often in a way that is authoritarian or repressive.