Question: Choose the correct statement. The expected return of a well-diversified portfolio depends on the correlations between the assets that compose it. Diversification only reduces idiosyncratic

Choose the correct statement.

The expected return of a well-diversified portfolio depends on the correlations between the assets that compose it.

Diversification only reduces idiosyncratic risk.

The most diversification is achieved when the correlation coefficient between assets is close to 1.

The volatility of a well-diversified portfolio is the average of the volatilities of its constituents.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

4. Sleekfon and Sturdyfon are two major cell phone manufacturers that have recently merged. Their current market sizes are as shown in Table 5-9. All demand is in millions of units. Sleekfon has...

Q:

The systematic risk principal says that The expected retum on a risky asset depends only on that asset's total risk risk Because idiosyncratic risk can be diversified away, investors shouldn't be...

Q:

Please help to solve these questions! Thanks! 11. Choose the correct statement. (\"i Diversification only reduces idiosyncratic risk. (\"1 The most diversification is achieved when the correlation...

Q:

0 1 . The statement: "A portfolio is less than the sum of it's parts", means: Select one: a . Portfolio returns will always be lower than the returns on individual stocks. b . For reasons that are...

Q:

11) Because callable bonds have uncertain maturities, callable bonds are riskier than noncallable 11 bonds TRUE FALSE 12) Which of the following statements about debentures is true. 11 A) Adebenture...

Q:

Short answer questions (show your work): 1.Magna Corp. provides you with the following information: profit margin = 4%; asset turnover = 1.8; debt = $2,000; equity = $4,000; plowback ratio = 80%.What...

Q:

1.A bank originates a pool of 200 thirty-year mortgages, each averaging $150 000, with an annual mortgage coupon rate of 8 per cent. What is the monthly mortgage payment? a.$550,323.43 b.$300,000.00...

Q:

I need your help with this: Can you please quote from the attached chapters / resource if possible? Corporations often use different costs of capital for different operating divisions. Using an...

Q:

BACKGROUND An SM bond is a 35-year Australian government bond with a face value of $1. They are marketed to consumers saving for retirement (who buy the S part) and investors (who buy the M part)....

Q:

help mi with my questions 21. There are three assets, A, B and C, where A is the market portfolio and C is the risk-free asset. The return on the market has a mean of 12% and a standard deviation of...

Q:

Please Provide a 2 to 3 page article review for each, there attached on this question. Your discussion should include a brief summary (including the big ideas or major points of the article) along...

Q:

What are the five core characteristics of a good job design?

Q:

The manager of the Radford Credit Union (RCU) wants to determine how many part-time tellers to employ to cover the peak demand time in its lobby from 11:00 am to 2:00 pm. RCU currently has three...

Q:

24. Philosopher means someone such as Plato, Aristotle, Descartes, or Kant. Determine whether the following are demonstrative definitions, enumerative defi nitions, defi nitions by subclass,...

Q:

On December 31, 2016, Nettle Corporation had 5,000, $2 preferred shares and 80,000 common shares issued. During 2017, the company completed the following share transactions: Apr. 1 Sold 10,000 common...

Q:

Salmon Limited reported profit of $465,325 for its November 30, 2017, year end. Cash dividends of $90,000 on the common shares and $65,000 on the noncumulative preferred shares were declared and paid...

Q:

On January 1, 2017, Marchelle Incorporated had an unlimited number of common shares authorized, 220,000 issued, and the balance in the Common Shares account was $2.2 million. The company reported a...

Q:

Kettle Creek Corporation had the following transactions and events: 1. Declared a cash dividend. 2. Paid the cash dividend declared in (1). 3. Issued common shares for cash. 4. Completed a 2-for-1...

Q:

On January 1, 2017, Fyre Lite Corporation had retained earnings of $650,000. During the year, Fyre Lite had the following selected transactions: 1. Declared and paid cash dividends, $245,000. 2....

Q:

what else did DuPont probably gain? Are there potential losses it should guard against?

Q:

Can the influencing process really be conducted ethically and in a way that meets the goal of human relations, or is it just manipulation?

Q:

The next time you negotiate, will you actually set threelimit, target, and openingobjectives? Why or why not?

Q:

In bargaining, does it really matter who makes the first offer?