One Would See the Greatest Amount of Diversification from Two

question 18

Multiple Choice

One would see the greatest amount of diversification from two securities that are:

• A)Positively correlated
• B)Negatively correlated
• C)Not correlated
• D)Perfectly correlated

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Definitions:

Test Statistic

A value calculated from sample data during a statistical hypothesis test to determine the p-value or to compare against a critical value.

Prediction Interval

An estimated range of values within which a future observation is expected to fall, with a certain probability.

Independent Variable

A variable in an experiment or model that is manipulated or changed to assess its effects on a dependent variable.

Probability Distribution

A mathematical function that describes the likelihood of obtaining the possible values that a random variable can assume.