The Most Important Criteria When Adding New Investments to a Portfolio

question 35

Multiple Choice

The most important criteria when adding new investments to a portfolio is the

• A) expected return of the new investment.
• B) standard deviation of the new investment.
• C) correlation of the new investment with the portfolio.
• D) selection of the risk-free asset.
• E) variance of the risk-free asset.

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Definitions:

Housing Construction

The process or business of building residential buildings, such as single-family homes, apartments, and condominiums.

Low Barriers

refer to minimal obstacles or challenges in entering a particular market or industry, facilitating easier entry for new competitors.

Competitive Price-Searcher

A competitive price-searcher is a firm in a market where it must search for an optimal price due to product differentiation, facing a downward-sloping demand curve.

Market Structure

The organization and characteristics of a market, including the number of firms, level of competition, and the distribution of market power.