Which of the Following Statements Is True

question 5

Multiple Choice

Which of the following statements is true?

• A)If many loans have negative correlations of returns the sum of the individual credit risks of loans viewed independently exactly estimates the risk of the whole portfolio.
• B)If many loans have negative correlations of returns the sum of the individual credit risks of loans viewed independently underestimates the risk of the whole portfolio.
• C)If many loans have positive correlations of returns the sum of the individual credit risks of loans viewed independently overestimates the risk of the whole portfolio.
• D)If many loans have negative correlations of returns the sum of the individual credit risks of loans viewed independently overestimates the risk of the whole portfolio.

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