Using the Markowitz Portfolio Approach,diversification

question 41

Multiple Choice

Using the Markowitz Portfolio Approach,diversification:

• A)increases risks and low correlation between assets indicates diversification potential,so low correlation between assets suggests that a firm is in a risk-prone position.
• B)increases risks and high correlation between assets indicates low diversification potential,so firms with low correlations have undertaken too much risk.
• C)reduces risk and low correlation between assets indicates diversification potential,so low correlation between assets offers a firm the opportunity to reduce risks.
• D)reduces risk and low correlation between assets indicates a lack of diversification,so low correlation between assets indicates that the firm needs to reconsider its risks.

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Definitions:

Miller Lite

A brand of light beer produced by Miller Brewing Company, known for its reduced calorie count compared to regular beers.

Bud Light

A brand of light beer produced by Anheuser-Busch InBev, known for its light body and low calorie count compared to regular beers.

Utility Function

A mathematical representation of how individuals rank preferences or choices from highest to lowest.

Equal Amounts

Identical quantities or measures of something, having the same value or size.