Which of the Following Statements Is(are)true Regarding the Variance of a Portfolio

question 25

Multiple Choice

Which of the following statements is(are) true regarding the variance of a portfolio of two risky securities?

• A) The higher the coefficient of correlation between securities,the greater the reduction in the portfolio variance.
• B) There is a linear relationship between the securities' coefficient of correlation and the portfolio variance.
• C) The degree to which the portfolio variance is reduced depends on the degree of correlation between securities.
• D) a and b.
• E) a and c.

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Definitions:

Appeal to Ignorance Fallacy

A logical fallacy where the lack of evidence is taken as proof of a claim's truth or falsehood.

Appeal to the Mob Fallacy

A logical fallacy that argues a position is true or correct because many or most people believe it.

Thermodynamics

The branch of physics that deals with the relationships between heat and other forms of energy and, by extension, the relationships between all forms of energy.