Combining Two Assets Having Perfectly Positively Correlated Returns Will Result

question 182

Multiple Choice

Combining two assets having perfectly positively 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) lies between the asset with the higher risk and the asset with the lower risk

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Definitions:

Tax

Mandatory monetary contributions or other forms of taxes levied on individuals or entities by government agencies to support government operations and a range of public services.

Supply Curves

A graphical representation that shows the relationship between the price of a good and the quantity of that good that producers are willing to supply.

Levied

Levied refers to the imposition of a tax, fee, or fine by a governmental authority, requiring payment from individuals or organizations.

Supply Curve

A graphical representation showing the relationship between the price of a good or service and the quantity supplied by producers over a period of time.