In a Two-Security Minimum Variance Portfolio Where the Correlation Between

question 59

Multiple Choice

In a two-security minimum variance portfolio where the correlation between securities is greater than −1.0,

• A) the security with the higher standard deviation will be weighted more heavily.
• B) the security with the higher standard deviation will be weighted less heavily.
• C) the two securities will be equally weighted.
• D) the risk will be zero.
• E) the return will be zero.

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Definitions:

Thick Shale

Refers to a substantial accumulation of shale rock, which is a fine-grained sedimentary rock formed from clay and silt.

Limestone

A sedimentary rock mainly composed of calcium carbonate, formed either by direct precipitation from marine water or through the accumulation of shell, coral, and algal debris.

Sandstone

a sedimentary rock consisting primarily of sand-sized minerals or rock grains, most commonly quartz.

Limestone

A type of sedimentary rock, primarily composed of calcium carbonate, often formed from the remains of marine organisms.