The diversification effect of a portfolio of two stocks:
A) increases as the correlation between the stocks declines.
B) increases as the correlation between the stocks rises.
C) decreases as the correlation between the stocks rises.
D) Both increases as the correlation between the stocks declines; and decreases as the correlation between the stocks rises.
Correct Answer:
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Q31: The standard deviation of a portfolio will
Q32: Beta measures:
A) the ability to diversify risk.
B)
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Q40: A well-diversified portfolio has negligible:
A) expected return.
B)
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