If the Correlation Between Two Shares Is +1,then a Portfolio

question 102

Multiple Choice

If the correlation between two shares is +1,then a portfolio combining these two shares will have a variance that is:

• A)less than the weighted average of the two individual variances.
• B)greater than the weighted average of the two individual variances.
• C)equal to the weighted average of the two individual variances.
• D)less than or equal to average variance of the two weighted variances,depending on other information.
• E)None of the above.

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Definitions:

Cell Phones

Portable telecommunications devices that allow users to make calls, send text messages, and access the internet.

Sales

The process or activity of selling goods or services to customers.

Cash Discounts

Discounts earned by buyers who pay bills within a stated period.

Sterling Industries

A fictitious or placeholder name that could refer to a company involved in manufacturing, technology, or another sector.