The Biggest Reduction in Risk Would Be Achieved by Combining

question 42

Multiple Choice

The biggest reduction in risk would be achieved by combining two assets into a portfolio with a correlation coefficient equal to ____.

• A) −1.0
• B) −0.5
• C) 0
• D) 0.5
• E) 1.0

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Definitions:

Depreciation Parameters

The set of assumptions and methodologies used to calculate the depreciation of an asset over its useful life.

Tangible Assets

Physical and material assets, such as buildings, machinery, and equipment, which are owned by a business and can be seen and touched.

Natural Resource

Assets that occur naturally in environments such as minerals, timber, and oil, often subject to depletion and depreciation over time.

MACRS Depreciation

MACRS Depreciation refers to the Modified Accelerated Cost Recovery System, a method of depreciation under U.S. tax law that allows for faster recovery of assets' costs over their useful lives.