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:

Manufacturing Cost

The total expense incurred in the production of goods, including raw materials, labor, and overhead costs.

Fixed Overhead

Indirect costs of manufacturing that remain relatively constant regardless of the level of production, such as rent, utilities, and salaries of managers.

Normal Production Costs

The typical expenses incurred in the process of producing goods, including direct labor, materials, and overhead.

Foreign Buyer

An individual or corporation from another country that purchases goods or services from a domestic seller.