The Benefits of Portfolio Diversification Are Highest When the Individual

question 54

Multiple Choice

The benefits of portfolio diversification are highest when the individual securities within the portfolio have returns that:

• A) vary directly with the rest of the portfolio.
• B) vary proportionally with the rest of the portfolio.
• C) are less than perfectly correlated with the rest of the portfolio.
• D)are perfectly correlated with the market portfolio.

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Definitions:

Systolic Pressure

The maximum arterial blood pressure during heart contraction, measured in millimeters of mercury (mmHg).

Diastolic Pressure

The pressure in the arteries when the heart rests between beats, representing the minimum arterial pressure during relaxation.

Velocity

The speed of an object in a given direction.

Cross-Sectional Area

A measurement of the size of a cross-section of a three-dimensional object, often used to calculate properties like flow and resistance.