The purpose of adding an asset with a negative or low positive beta is to ________.
A) reduce profit
B) reduce risk
C) increase profit
D) increase risk

Question

Quizplus · Accepted Answer

The purpose of adding an asset with a negative or low positive beta is to reduce risk. Beta measures the volatility or systematic risk of an asset compared to the market. An asset with a beta of less than 1 indicates that it is less volatile than the market. By adding such an asset to a portfolio, the overall risk of the portfolio can be reduced without significantly sacrificing returns. On the other hand, adding an asset with a high positive beta can increase the risk of the portfolio.

The Purpose of Adding an Asset with a Negative or Low