Question: Explain how the range is used in scenario analysis. Question 3: What is the meaning of risk preference, what are the three risk preferences? a)

Explain how the range is used in scenario analysis. Question 3: What is the meaning of risk preference, what are the three risk preferences?

a) Why is the correlation between asset returns important?

b) How does diversification allow risky assets to be combined so that the risk of a portfolio is less than the risk of the individual asset in it?

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