If Two Investments Are Perfectly Negatively Correlated

question 40

Multiple Choice

If two investments are perfectly negatively correlated

• A) Diversification is not effective at reducing risk
• B) Bets are perfectly hedged and risks are canceled out
• C) Diversification reduces risk without changing the expected payoff
• D) Diversification reduces both risk and the expected payoff

Understand the concept of multiplicative and additive inverses.

Identify and apply real number properties (e.g., distributive, commutative, associative, additive inverse, additive identity properties).

Perform basic arithmetic operations, including the use of the distributive property to simplify expressions.

Calculate the total amount saved over time, including simple interest calculations.

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