If the Correlation Between Two Stocks Is +1, Then a Portfolio

question 60

Multiple Choice

If the correlation between two stocks is +1, then a portfolio combining these two stocks will have a variance that is:

• A) less than the weighted average of the two individual variances.
• B) greater than the weighted average of the two individual variances.
• C) equal to the weighted average of the two individual variances.
• D) less than or equal to average variance of the two weighted variances, depending on other information.

Comprehend the term structure of interest rates and its components.

Grasp the relationship between bond prices and market interest rates.

Recognize the influence of inflation expectations on the term structure of interest rates.

Understand the significance of bond ratings and their relation to default risk.

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Definitions:

Humanistic Perspective

A psychological viewpoint that emphasizes individual potential for growth and the importance of self-actualization and psychological well-being.

Inherently Good

A belief or perspective that humans are born with an innate tendency towards goodness and moral integrity.

Avoidance-Oriented

Characterized by strategies aimed at avoiding failure or negative outcomes rather than achieving success.

Affiliation Motivation

The drive to connect with others and form social relationships; it's a fundamental human impulse to seek companionship and acceptance within a group.