Combining Two Assets Having Perfectly Negatively Correlated Returns Will Result

question 51

Multiple Choice

Combining two assets having perfectly negatively correlated returns will result in the creation of a portfolio with an overall risk that ________.

• A) remains unchanged
• B) decreases to a level below that of either asset
• C) increases to a level above that of either asset
• D) stabilizes to a level between the asset with the higher risk and the asset with the lower risk

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Definitions:

Real Wage

Adjusted for inflation, it represents the purchasing power of the wage rate.

Profit-Maximizing Firm

A company that operates in such a way as to maximize its profits by adjusting output levels based on market conditions.

Marginal Revenue Product

Refers to the additional revenue generated from employing one more unit of a resource or factor of production.

Marginal Resource Cost

The additional cost incurred by acquiring or using one more unit of a resource.