Identifying the Risk Contribution of an Asset to a Portfolio

question 2

Multiple Choice

Identifying the risk contribution of an asset to a portfolio is more difficult than identifying its return contribution because

• A) Risk does not always increase when you add assets to a portfolio.
• B) Risk, unlike return, is not additive.
• C) Risk is a property of portfolios, not one of individual assets.
• D) Some assets have no risk.

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Definitions:

Mature Environments

Environments or sectors that have reached a state of equilibrium with established players, slow innovation, and stable customer demand.

Stable Environments

Contexts or settings characterized by predictability and consistent conditions, beneficial for strategic planning and business operations.

Rapid Growth

A significant increase in a company's revenue, size, or market share in a short period, often seen in start-up ecosystems.

Venture

A business venture refers to a new enterprise or initiative that involves some level of risk, aiming for growth and profit.