The Only Condition Under Which Risk Can Be Reduced to Zero

question 89

True/False

The only condition under which risk can be reduced to zero is to find securities that are perfectly negatively correlated (ρ = −1.0)with each other.

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Definitions:

Financial Growth Factors

Components that contribute to the increase in value of financial assets or earnings.

Geometric Mean

The nth root of the product of n numbers, used to calculate the average rate of return over time or the mean of ratios.

Growth Factor

One plus the percentage increase over a period of time. A growth factor less than 1 indicates negative growth, whereas a growth factor greater than 1 indicates positive growth. The growth factor cannot be less than 0.

Average Wage

The mean earnings of workers in a specific job, industry, or region, often used to compare economic wellbeing.