Which of the Following Is TRUE About Diversification

question 83

Multiple Choice

Which of the following is TRUE about diversification?

• A)By diversifying, portfolio risk can be reduced to zero.
• B)There is no benefit from diversification if the correlation coefficient is 1.
• C)The variance is the weighted average of the individual securities' variances when the correlation is equal to -1.
• D)If the covariance between two securities is negative, then the portfolio's standard deviation can be reduced to zero.

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Definitions:

Depolarization

A reduction in the difference of electric potential across a cell membrane, leading to the possibility of producing an action potential.

Repolarization

The process by which cells restore their resting negative membrane potential after depolarization.

Cardiac Muscle Cells

Specialized muscle cells found in the heart that contract rhythmically and involuntarily to pump blood throughout the body.

Capillary Network

A complex intertwining of capillaries supplying organs and tissues with nutrients and oxygen and removing waste products.