A Portfolio Manager Is Considering Adding Another Security to His

question 106

Multiple Choice

A portfolio manager is considering adding another security to his portfolio. The correlations of the five alternatives available are listed below. Which security would enable the highest level of risk diversification?

• A) 0.0
• B) 0.25
• C) - 0.25
• D) - 0.75
• E) 1.0

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Definitions:

Flat Organizational Structure

A type of organizational configuration that has few or no levels of middle management between staff and executives, promoting faster decision-making and communication.

Customer Departmentalization

The arrangement of jobs around the needs of various types of customers.

Sales Account

A record or agreement defining the relationship and transactions between a buyer and a seller, often including terms of sale, credit limits, and purchase history.