A Completely Diversified Portfolio Would Have a Correlation with the Market

question 74

Multiple Choice

A completely diversified portfolio would have a correlation with the market portfolio that is

• A) Equal to zero because it has only unsystematic risk.
• B) Equal to one because it has only systematic risk.
• C) Less than zero because it has only systematic risk.
• D) Less than one because it has only unsystematic risk.
• E) Less than one because it has only systematic risk.

---

Definitions:

Objectivity

The quality of being unbiased, detached, and free of any personal or subjective influences.

Individual Measurements

Refers to the unique data gathered from single entities or participants in a study, highlighting variations among them.

Free Association

A psychoanalytic technique where the patient verbalizes thoughts including random words or associations, aiding in uncovering unconscious thoughts or desires.

Structuralism

An approach in psychology that seeks to understand the structure of the mind by analyzing the components of mental experiences.