Owning Two Securities Instead of One Will Not Improve a Portfolio's

question 7

Multiple Choice

Owning two securities instead of one will not improve a portfolio's risk-return tradeoff if the two securities are:

• A)perfectly positively correlated with each other.
• B)perfectly independent of each other.
• C)perfectly negatively correlated with each other.
• D)of the same category,e.g.blue chips.

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Definitions:

Duty Of Loyalty

An obligation for individuals in certain roles to act in the best interest of another person or entity, typically within a fiduciary relationship.

Duty Of Care

An obligation to ensure the safety or well-being of others through a reasonable level of attention and caution.

Business Judgment Rule

A legal principle that protects company directors and officers from liability for decisions made in good faith and believed to be in the best interest of the company.

Indemnified

Protected against financial loss or compensated for loss or damage, often through insurance or indemnity clauses in contracts.