To Reduce Risk as Much as Possible, You Should Combine

question 51

Multiple Choice

To reduce risk as much as possible, you should combine assets which have one of the following correlation relationships?

• A)strong positive
• B)slightly positive
• C)slightly negative
• D)strongly negative
• E)zero

---

Definitions:

Explicit Cost

The monetary payment made by a firm to an outsider to obtain a resource.

Accounting Profits

The net earnings of a company calculated according to generally accepted accounting principles, taking into account all explicit costs but not implicit costs.

Implicit Cost

Costs that represent the loss of potential gain from using assets in an alternative option rather than in their current use.

Implicit Costs

The opportunity costs of resources that are owned by the firm and used in production, not involving direct payment of money but affecting the firm's profitability.