A Portfolio Manager Is Considering Adding Another Security to His

question 73

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:

Discount Coupons

Vouchers or codes that offer a rebate or reduction on the price of goods or services.

Grocery Store

A retail store that primarily sells food, both fresh and packaged, along with various household items.

Willingness To Pay

The maximum amount an individual is prepared to spend to procure a good or service.

Charge Customers

The act of requesting payment from consumers for goods or services provided.