A Change in the Correlation Coefficient of the Returns of Two

question 47

Multiple Choice

A change in the correlation coefficient of the returns of two securities in a portfolio causes a change in:

• A) both the expected return and the risk of the portfolio.
• B) only the expected return of the portfolio.
• C) only the risk level of the portfolio.
• D) neither the expected return nor the risk level of the portfolio.

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Definitions:

Non-controlling Interest

The portion of equity in a subsidiary not owned by the parent company, reflecting the interest of minority shareholders.

Subsidiary

A company controlled by another company, often referred to as the parent company.

Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits.

Non-controlling Interest

A stake in a company that is less than 50%, implying that the holder does not have control over the company's operations.