The Benefits of Portfolio Diversification Are Highest When the Individual

question 82

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 largely uncorrelated with the rest of the portfolio.
• D) are perfectly correlated with the market portfolio.

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Definitions:

Long-Term Consequences

The effects or outcomes that persist for an extended period after the initial event or action, potentially lasting for years or even generations.

United States

A country primarily located in North America, consisting of 50 states and a federal district.

Economics

The social science that studies how individuals, governments, and societies make choices about the allocation of resources to satisfy their wants and needs.

Educational Debt

The accumulation of debt by individuals as a result of borrowing money to finance their education.