An Asset with a Large Standard Deviation of Returns Can

question 69

True/False

An asset with a large standard deviation of returns can lower portfolio risk if its returns are uncorrelated with the returns on the other assets in the portfolio.

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Definitions:

Shareholders Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the amount that would be returned to shareholders if all assets were liquidated and all debts repaid.

Closing Rate

The exchange rate used to convert foreign currency-denominated financial statements of a subsidiary into the reporting currency of the parent company at the balance sheet date.

Foreign Subsidiary

A company that is completely or partially owned and controlled by another company, but operates in a different country than the parent company.

Functional Currency

The currency of the primary economic environment in which an entity operates, usually reflected in its financial statements.