The Risk of a Portfolio Consisting of Two Uncorrelated Assets

question 25

Multiple Choice

The risk of a portfolio consisting of two uncorrelated assets will be

• A) equal to zero.
• B) greater than the risk of the least risky asset but less than the risk level of the more risky asset.
• C) greater than zero but less than the risk of the more risky asset.
• D) equal to the average of the risk level of the two assets.

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Definitions:

Diluted Earnings

Earnings per share calculated under the assumption that all convertible securities have been converted into common stock, providing a "worst case" scenario perspective on earnings per share.

Ownership Perspective

An approach or mindset focusing on the long-term benefits and responsibilities of owning an asset or investment.

GAAP

Generally Accepted Accounting Principles, a framework of accounting standards, principles, and procedures from which financial statements are prepared in the United States.

Cumulative

Pertaining to an aggregate or total amount added up over time, often used in context with dividends that are accumulated if not paid out.