The Benefits of Portfolio Diversification Are Highest When the Individual

question 7

Multiple Choice

The benefits of portfolio diversification are highest when the individual securities have returns that:

• A)vary directly with the rest of the portfolio.
• B)vary indirectly with the rest of the portfolio.
• C)are uncorrelated with the rest of the portfolio.
• D)are countercyclical.

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Definitions:

Tax Revenue

The financial benefits governments realize from taxation.

Doodads

A nonspecific term often used to refer to small, miscellaneous items or gadgets.

Producer Surplus

The difference between the amount a producer is willing to accept for a good versus what they actually receive, often due to market prices.

Government Imposes

Actions taken by the government to regulate, tax, or otherwise exert authority over individuals and organizations, typically with the aim of affecting economic outcomes.