If ABC Inc

question 59

Multiple Choice

If ABC Inc.and XYZ Inc.have returns that are perfectly positively correlated:

• A)Adding XYZ Inc to a portfolio that consists of only ABC Inc.will reduce risk.
• B)Adding ABC Inc to a portfolio that includes only XYZ Inc.will increase risk.
• C)Adding XYZ Inc.to a portfolio that consists of only ABC Inc.will neither increase nor decrease the risk of the portfolio.
• D)Adding XYZ Inc to a portfolio that consists of only ABC Inc.will neither increase nor decrease idiosyncratic risk but will lower systematic risk.

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Definitions:

Price Changes

Variations in the cost of goods and services over time, affecting consumer behavior and economic trends.

Hyperinflation

An extremely high and typically accelerating inflation rate, often resulting in the quick erosion of the real value of the local currency.

Inflation

The tempo at which prices for general goods and services ascend, leading to a depreciation in money's buying strength.

Government

The organization or system through which a society or community is ruled, often responsible for creating and enforcing laws, policies, and regulations.