Table 8.1
-If you were to create a portfolio designed to reduce risk by investing equal proportions in each of two different assets, which portfolio would you recommend? (See Table 8.1)
A) Assets A and B
B) Assets A and C
C) none of the available combinations
D) cannot be determined

Question

Table 8.1 
-If you were to create a portfolio designed to reduce risk by investing equal proportions in each of two different assets, which portfolio would you recommend? (See Table 8.1)
A) Assets A and B 
B) Assets A and C 
C) none of the available combinations 
D) cannot be determined

Quizplus · Accepted Answer

Assets A and B have the lowest correlation coefficient of -0.3, indicating a negative relationship between the returns of the two assets. Investing equal proportions in each asset can help reduce overall portfolio risk through diversification.

Table 8.1 -If You Were to Create a Portfolio Designed to Reduce