Which One of the Following Statements Is True Regarding the Variance

question 27

Multiple Choice

Which one of the following statements is true regarding the variance of risky portfolios?

• A) the higher the correlation coefficient between securities, the greater will be the reduction in the portfolio variance
• B) there is a direct relationship between the securities correlation coefficient and the portfolio variance
• C) the degree to which the portfolio variance is reduced depends on the degree of correlation between securities
• D) proper diversification can reduce or eliminate all of a portfolio's risk

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Definitions:

Origin

The point at which something begins or arises, often used in various contexts such as the origins of a concept, product, or phenomenon.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, or insurance premiums.

Workplace Rage

The demonstration of aggressive behaviour toward co-workers or the work setting.

Physical Exhaustion

A state of extreme physical tiredness or fatigue, often resulting from excessive work or exercise.