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:

Cohesiveness

The degree to which members of a group or team are attracted to each other and motivated to stay in the group.

Highly Cohesive Teams

Groups of individuals who exhibit a strong sense of unity and commitment towards achieving shared goals, often resulting in higher productivity and morale.

Organizational Goals

Objectives or targets that a business or organization aims to achieve, guiding its strategic planning and actions.

Team Norms

Shared guidelines or rules of conduct within a team that dictate the acceptable behavior of team members.