Combining Uncorrelated Assets Will

question 46

Multiple Choice

Combining uncorrelated assets will

• A)increase the overall risk level of a portfolio.
• B)decrease the overall risk level of a portfolio.
• C)not change the overall risk level of a portfolio.
• D)cause the other assets in the portfolio to become positively related.

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Definitions:

Residual Value

The projected worth of an asset upon reaching the conclusion of its service period.

Straight-line Method

A depreciation method that allocates an equal amount of depreciation each year over the useful life of an asset.

MACRS

Modified Accelerated Cost Recovery System, a method of depreciation in the U.S. that allows businesses to recover investments in certain property through annual deductions.

Property

Physical or intangible assets owned by an individual or business, including land, buildings, and intellectual property.