If Two Investments Are Uncorrelated

question 55

Multiple Choice

If two investments are uncorrelated:

• A) there is no benefit from diversification.
• B) there is no benefit to hedging.
• C) diversification reduces risk without changing the expected payoff.
• D) diversification reduces both risk and the expected payoff.

---

Definitions:

Tension Reduced

A state or process whereby physiological or psychological tension is decreased.

Stability

The state or quality of being stable; firmness in position.

Deprivation

The lack or denial of something considered to be a necessity, such as food, shelter, or emotional comfort.