Question: How does the correlation coefficient affect the standard deviation of a portfolio? Question 2 Answer a . Lower correlation between assets generally leads to lower

How does the correlation coefficient affect the standard deviation of a portfolio?
Question 2Answer
a.
Lower correlation between assets generally leads to lower portfolio standard deviation.
b.
Higher correlation always leads to lower portfolio standard deviation.
c.
The standard deviation is always the weighted average of the component standard deviations.
d.
The correlation coefficient does not affect the standard deviation of a portfolio.

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:

Leisure City has an Electric Utility Enterprise Fund (EUEF) that provides electric power to its resi- dents and to city agencies. Following is the EUEF opening trial balance at January 1, 2013 (all...

Q:

Question 1 1 pts The importance of being able to measure market risk is because: market risk is related to events and factors that are firm-specific the reward for bearing risk should depend only on...

Q:

Please Help! 4.4 Question 4 Which of the following statements about covariance and correlation is less accurate? A A zero covariance implies there is no linear relationship between the returns of two...

Q:

Suppose you want to construct a portfolio using stocks X and Y . Which of the following is true about the standard deviation of the portfolio. Group of answer choices We can't say anything about the...

Q:

urgent The annual returns for XYZ's common stock over the years 2016, 2017, 2018, and 2019 were 5%, 9%, -2%, and 10%. What is the arithmetic mean return for XYZ's common stock? Select one: O A....

Q:

There are 10 potential entrants into the market for tomatoes. All tomato growers are identical. They face a fixed cost of 500 if they choose to enter the market and then have a marginal cost of 10...

Q:

hh explain111 2. Use the geometric series formula to express the present value of payments through p, T and rm, where I'm is the monthly interest rate. Plug in the numeric value for p, 7 and put this...

Q:

I need question one answered. Attached are documents from the chapter to help add in the question. A 1 D E F Final Examination FINC 5880 3 5 6 7 8 9 10 11 C Question 6. (15 points) Your portfolio is...

Q:

Question Correlation, risk, and return Matt Peters wishes to evaluate the risk and potun behorssociated with various cometion of Wunder three med degree of contation perfect pendant per negative. The...

Q:

(Computing the standard deviation for a portfolio of two risky investments) Mary Guilott recently graduated from Nichols State University and is anxious to begir investing her meager savings as a way...

Q:

(Computing the standard deviation for a portfolio of two risky investments) Mary Guilott recently graduated from college and is evaluating an investment in two companies' common stock. She has...

Q:

Explain main features of performance appraisal.

Q:

Assuming that corporate tax rates are: 10% for income from $0 to $20,000, 25% for income from $20,001 to $50,000, and 35% for income from $50,001 and over. What are your total taxes paid on $50,000...

Q:

Expenditures, encumbrances, and budgetary accounts are used by private not - for - profit organizations. True or False Next Prev 3 7 of 5 2

Q:

Question 7 Not yet answered Marked out of 1.00 P Flag question When the non-cash property is invested in a partnership, the non-cash property recorded according to: Select one: a. fair value b. The...