When Two Risky Securities That Are Positively Correlated but Not

question 5

Multiple Choice

When two risky securities that are positively correlated but not perfectly correlated are held in a portfolio,

• A)the portfolio standard deviation will be greater than the weighted average of the individual security standard deviations.
• B)the portfolio standard deviation will be less than the weighted average of the individual security standard deviations.
• C)the portfolio standard deviation will be equal to the weighted average of the individual security standard deviations.
• D)the portfolio standard deviation will always be equal to the securities' covariance.
• E)none of the above are true.

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