Question 7

As the correlation coefficient between two securities changes in a portfolio: (Select the best answer below.) O A. both expected return and risk change. O B. neither expected return not risk changes. O C. only risk changes.In the real world, most of the assets available to investors O A. tend to be somewhat negatively correlated. O B. tend to be somewhat positively correlated. O C. tend to be either perfectly positively or perfectly negatively correlated. O D. tend to be uncorrelated.Jason Jackson is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. He is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered the following data: [ ] . a. Calculate the betas for portfolios A and B. b. Compare the risk of each portfolio to the market as well as to each other. Which portfolio is more risky? a. The beta of portfolio A is . (Round to three decimal places.) The beta of portfolio B is . (Round to three decimal places.) b. Portfolio is slightly less risky than the market (average risk), while portfolio is more risky than the market. Portfolio 's return will move more than portfolio 's for a given increase or decrease in market risk. (Select from the drop-down menus.) Portfolio is the more risky portfolio. (Select from the drop-down menu.) B A\f