Which of the Following Statements About the Bundling Risks into Portfolios

question 21

Multiple Choice

Which of the following statements about the bundling risks into portfolios is not correct?

• A) Due to the randomness of business activity bundling risks into portfolios will be reducing risk.
• B) Natural diversification occurs across uncorrelated risks that are bundled into a portfolio.
• C) Bundling risk into a portfolio only reduces risk if uncorrelated and/or negatively correlated exposures are included.
• D) The best reduction in risk is accomplished by including negatively correlated exposures into a portfolio.