We Can Reduce Volatility by Investing in Less Than Perfectly

question 92

Multiple Choice

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

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

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Definitions:

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