Which One of These Conditions Must Exist If the Standard

question 10

Multiple Choice

Which one of these conditions must exist if the standard deviation of a portfolio comprised of two securities is to be less than the weighted average of the standard deviations of the individual securities held within that portfolio?

• A)β < 1
• B)R_m > 1
• C)ρ < 1
• D)β = 0
• E)ρ > 1

Familiarize with the calculation and implications of a stock’s beta in portfolio management.

Learn how to calculate the expected return of a portfolio comprising different securities.

Identify the relationship between risk and return and how it affects investment decisions.

Understand the implications of market efficiency on stock prices and returns.

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Definitions:

Binding Price Floor

A minimum price set by the government or regulatory body that is above the equilibrium price, causing a surplus in the market.

Wheat Market

A sector of the commodities market that deals with the trading of wheat products and its derivatives.

Price Paid

The sum of currency traded in return for a product or service.

Binding Price Floor

A government-imposed minimum price set above the equilibrium price, leading to a surplus of the product in the market.