Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

can someone explain to me why this is correct in like simple terms Which of the following best describes diversification? A) The correlation coefficient between

can someone explain to me why this is correct in like simple terms image text in transcribed
Which of the following best describes diversification? A) The correlation coefficient between a completely diversified portfolio and the market portfolio is equal to 1 because a diversified portfolio carries only market risk. B) As the number of assets in a portfolio increases, the amount of systematic risk decreases because of diversification. C) You cannot achieve any diversification by combining two assets whose correlation coefficient is zero. D) Diversification reduces the variability of returns (as measured by the standard deviation) of each individual stock held in a portfolio. E) None of the above

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Money Banking And Financial Markets

Authors: Stephen Cecchetti, Kermit Schoenholtz

3rd Edition

007337590X, 9780073375908

More Books

Students also viewed these Finance questions