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:

Constant

A fixed value that does not change in mathematical expressions or in the formulation of algorithms and calculations.

Expected Dividend

The projected payment a company is expected to distribute to its shareholders from its earnings.

Market Risk Premium

The market risk premium is the additional return an investor expects from holding a risky market portfolio instead of risk-free assets.

Risk-Free Rate

The theoretical rate of return on an investment with no risk of financial loss, often represented by government bonds.