Assume You Are Considering Combining Two Investments to Form a Portfolio

question 52

Multiple Choice

Assume you are considering combining two investments to form a portfolio and you are very concerned with the risk that will result from the combination.If you want to attain the greatest effect from diversification, you would prefer that the assets are related.

• A)negatively
• B)positively
• C)not
• D)The relationship between the two investments gives no indication of the diversification effect that will result by combining them to form a portfolio.
• E)Diversification is not an important factor in investment decisions.

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Definitions:

Dynamic Conflict

A situation of opposition or struggle between forces that are active and capable of causing change.

Behavior Therapy

A type of psychotherapy that focuses on modifying negative behaviors and thought patterns.

Symptom Substitution

A hypothesis in some psychological schools of thought that a symptom will be replaced by another if the underlying cause of the symptom is not addressed.

Behavioral Activation

A therapy technique designed to help patients engage more in their lives through activities that are aligned with their values, to combat depression.