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:

Viral Infection

The invasion and multiplication of viruses in the body, which can cause disease.

Exchange of Bodily Fluids

The transfer of bodily substances such as blood, saliva, semen, and vaginal fluids, often relevant in discussions of infectious disease transmission.

AIDS

Acquired Immune Deficiency Syndrome, a chronic, potentially life-threatening condition caused by the human immunodeficiency virus (HIV) affecting the immune system.

Airborne Molecules

Tiny particles or substances suspended in the air that can be inhaled or absorbed by organisms.