You Wish to Diversify Your Single-Security Portfolio in a Way

question 53

Multiple Choice

You wish to diversify your single-security portfolio in a way that will maximize your reduction in risk.Which of the following securities should you add to your portfolio?

• A)Treasury bills that have a correlation coefficient of 0.0 with your current security
• B)Alpha Company stock that has a correlation coefficient of -0.25 with your current security
• C)Beta Company stock that has a correlation coefficient of 0.50 with your current security
• D)Delta Company bonds that have a correlation coefficient of 0.36 with your current security

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Definitions:

Serotonin-Producing Neurons

Neurons responsible for the production and release of serotonin, a neurotransmitter that plays a key role in regulating mood, appetite, sleep, and cognitive functions.

Ecstasy

An overwhelming feeling of intense happiness, joy, or delight.

Marijuana

A psychoactive drug from the Cannabis plant used primarily for medical or recreational purposes, known for its relaxing and euphoric effects.

Drug Use

The act of consuming substances which can alter the body's physiological or psychological state.