Question: The only condition under which risk can be reduced to zero is to find securities that are perfectly negatively correlated (r = -1.0) with each

The only condition under which risk can be reduced to zero is to find securities that are perfectly negatively correlated (r = -1.0) with each other

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:

Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. Following is the company's unadjusted trial balance as of December 31, 2021....

Q:

6. The only condition under which total risk can be reduced to zero is to find securities that are perfectly negatively correlated with each other. [True/ False]

Q:

ANSWER ALL MCQs JUSTIFY ALL YOUR ANSWERS 1.The long-run objective of financial management is to: A maximize earnings per share. B maximize the value of the firm's common stock. C maximize return on...

Q:

The risk of the portfolio Is dependent upon the correlation coefficient between the two assets Correlation coefficients the product of the assets' standard deviations and their expected returns all...

Q:

i jsut need answer no explanation RISK AND RETURN 5) Which of the following is correct? a) We should construct a perfectly-positively correlated stocks' portfolio b) the portfolio standard deviation...

Q:

1 1 . What is the formula for the correlation coefficient ( ) ? What does a correlation coefficient of - 1 indicate about the relationship between two variables? What does a correlation coefficient...

Q:

You are given $10, 000 in cash to invest in a portfolio consisting of abroad stock index fiind P, and a portfolio of T-bills, F. You know that the expected return on the stock index is 18%, with a...

Q:

Want of 15 A portfolio consists of only the market portfolio (with an expected return of 15.3% and a standard deviation of 15.2%) and the risk-free asset. The risk-free rate is 4.5%. If the target...

Q:

please help me to correct these questions. thank you You are an active portfolio manager for a large hedge fund. The overall return on your portfolio for the year is 35 percent. What is your fund's...

Q:

QUESTION 15 What range of values can the correlation coefficient take? 0 zero to +1 @ -1 to M O -innityto +innity 0 zero to +innity QUESTION 16 Considertwo stocks X and Vwith tne following expected...

Q:

The characteristics of two of the stocks are as follows Stock Expected Return Standard Deviation A 10% 80% B 896 40% The correlation between A and B is -1. with zero standard Since they are perfectly...

Q:

Problem 7-2 Purchase and Depreciate Two Items of Property, Plant, & Equipment Recently the Ace Manufacturing Company purchased an office building and a new computer system. Below is the information...

Q:

Airfield Answers Corporation had several expenditures in 20X5: a. Testing new plastic prior to use in commercial production b. Redesign of prototype to improve performance c. Testing electronic...

Q:

uthor Stephen Gould wrote The fact that no one has ever come close to finding a consistent way to beat the system despite intense efforts by some of the smartest people in the world probably...

Q:

Draw a class diagram and its relationship based on the following statements. You can use any UML tool/software to represent your class diagram. Do NOT copy and paste your diagram, use the attachment...