A Completely Diversified Portfolio Would Have a Correlation with the Market

question 98

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.

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Definitions:

Overapplied Overhead

This refers to a situation in which the allocated overhead cost is greater than the actual overhead cost incurred.

Predetermined Rate

A rate calculated before the fiscal period begins, used to apply costs to production or operations, often based on labor hours or machine hours.

Predetermined Overhead Rate

A rate calculated at the beginning of the period, used to allocate overhead costs to products based on a specific activity base.

Machine Hours

Machine hours represent the total amount of time that machines are operating in a manufacturing or production process.