International Diversification Will Provide Low Risk When the Investor Finds

question 22

True/False

International diversification will provide low risk when the investor finds international securities having a compound rate of return equal to that of the United States and a correlation coefficient close to that of the United States portfolio.

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Definitions:

Entity Method

An accounting technique used in consolidations, treating the parent and subsidiary as separate entities for the calculation of minority interest and consolidated net income.

Non-Controlling Interest

The portion of equity in a subsidiary not held by the parent company, reflecting the minority shareholders' share of the profits and losses.

Net Assets

The total assets of an entity minus its total liabilities, representing the owners' equity or net worth of the entity.

Fair Value

A market-based measurement of the price at which an asset could be bought or sold or a liability settled, under current market conditions.