We Can Reduce Volatility by Investing in Less Than Perfectly

question 74

Multiple Choice

We can reduce volatility by investing in less than perfectly correlated assets through diversification because the expected return of a portfolio is the weighted average of the expected returns of its shares, but the volatility of a portfolio:

• A)is independent of weights in the shares.
• B)depends on the expected return.
• C)is less than the weighted average volatility.
• D)is higher than the weighted average volatility.

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