QUESTION 1

1. If the returns for two assets have a correlation coefficient of negative one, then there are no benefits of diversification by combining these assets in a two-asset portfolio.

   True

   False

1 points

QUESTION 2

1. If you are building a portfolio, then you desire assets that have a correlation coefficient of negative one.

   True

   False

1 points

QUESTION 3

1. A wine manufacturer could diversify by:

   having vineyards in different locations

   growing different types of grapes

   selling both online and at the cellar door

   all of the above

   QUESTION 4

   Utilising the fact that two or more asset values do not always move in the same direction at the same time in order to reduce the risk of a portfolio is called synchronisation.

   True

   False

   A nannying business could diversify by:

   offering services in different locations

   offering both long-term care and casual babysitting

   obtaining funding from different sources (for example, a bank loan and family)

   all of the above

   QUESTION 7

   Which is an example of diversification?

   		Investing in different investment classes (for example, property and shares and cash)
   		Investing in companies from different industries
   		investing in companies from different parts of the world
   		all of the above

   Diversification is commonly explained with the phrase:

   "Don't put all your eggs in one basket"

   "Always invest everything you have into ONE single thing"

   "Investors require compensation (return) for holding a particular level of risk"

   "Don't put the cart before the horse"

   QUESTION 9

   A collection of investments held by a person or organisation is called:

   		lots of money
   		a portfolio
   		infinite possiblity
   		a bucket

   If you are building a portfolio, then you desire assets that have a correlation coefficient of one.

   True

   False

   1 points

   QUESTION 10

   1 points

   QUESTION 8

   1 points

   QUESTION 6

   1 points

   QUESTION 5

   If two assets with return correlation coefficients equal to one make up a portfolio, then the portfolio does not take advantage of any diversification benefits.

   True

   False