Which of the Following Securities Could NOT Have Any Benefits

question 7

Multiple Choice

Which of the following securities could NOT have any benefits for diversification with your investment portfolio?

• A)Treasury bills with a correlation coefficient of 0.0 with your portfolio
• B)Alpha Company stock that has a correlation coefficient of -0.25 with your portfolio
• C)Beta Company stock that has a correlation coefficient of 0.50 with your portfolio
• D)All of these choices would reduce risk for your portfolio and therefore show at least some benefit to diversification.

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Definitions:

Capital Gains

The profit from the sale of an asset or investment.

Average Tax Rate

The percentage of total income that is paid in taxes.

Interest Income

Earnings from investments in interest-bearing accounts, bonds, or other financial instruments that pay periodic interest.

Eligible Dividends

Dividends designated by a company for tax purposes, which may qualify for preferential tax treatment under certain jurisdictions.