This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Which of the following securities could NOT have any benefits for diversification with your ... (Read 27 times)

karen

  • Hero Member
  • *****
  • Posts: 537
on: Jul 10, 2018
Which of the following securities could NOT have any benefits for diversification with your investment portfolio?
 
  A) Treasury bills with a correlation coefficient of 0.0 with your portfolio
  B) Alpha Company stock that has a correlation coefficient of -0.25 with your portfolio
  C) Beta Company stock that has a correlation coefficient of 0.50 with your portfolio
  D) All of these choices would reduce risk for your portfolio and therefore show at least some benefit to diversification.

Question 2

You wish to diversify your single-security portfolio in a way that will maximize your reduction in risk. Which of the following securities should you add to your portfolio?
 
  A) Treasury bills that have a correlation coefficient of 0.0 with your current security
  B) Alpha Company stock that has a correlation coefficient of -0.25 with your current security
  C) Beta Company stock that has a correlation coefficient of 0.50 with your current security
  D) Delta Company bonds that have a correlation coefficient of 0.36 with your current security


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

AaaA

  • Sr. Member
  • ****
  • Posts: 339
Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: D

Answer to Question 2

Answer: B
Explanation: B) Negative correlation means that two different asset returns move in different directions over time. Thus one can offset the bad performance of the other.


karen

  • Member
  • Posts: 537
Reply 2 on: Jul 10, 2018
Thanks for the timely response, appreciate it

xiazhe

  • Member
  • Posts: 331
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

« previous next »
 

Did you know?

During the twentieth century, a variant of the metric system was used in Russia and France in which the base unit of mass was the tonne. Instead of kilograms, this system used millitonnes (mt).

Did you know?

Elderly adults are at greatest risk of stroke and myocardial infarction and have the most to gain from prophylaxis. Patients ages 60 to 80 years with blood pressures above 160/90 mm Hg should benefit from antihypertensive treatment.

Did you know?

Barbituric acid, the base material of barbiturates, was first synthesized in 1863 by Adolph von Bayer. His company later went on to synthesize aspirin for the first time, and Bayer aspirin is still a popular brand today.

Did you know?

Walt Disney helped combat malaria by making an animated film in 1943 called The Winged Scourge. This short film starred the seven dwarfs and taught children that mosquitos transmit malaria, which is a very bad disease. It advocated the killing of mosquitos to stop the disease.

Did you know?

Nitroglycerin is used to alleviate various heart-related conditions, and it is also the chief component of dynamite (but mixed in a solid clay base to stabilize it).

Percentages of adolescents indicating Benefits and Costs of employment. Percentages of adolescents indicating Benefits and Costs of employment.
This chart illustrates the four quadrants in which we can place the relationships between the state This chart illustrates the four quadrants in which we can place the relationships between the state
Among the health benefits of marriage is a longer life. Among the health benefits of marriage is a longer life.
Benefits and Drawbacks of Aquaculture "فوائد وعيوب تربية الأحياء" Benefits and Drawbacks of Aquaculture "فوائد وعيوب تربية الأحياء"
Fiber Has Many Health Benefits Fiber Has Many Health Benefits
Benefits and costs of herbicide applications Benefits and costs of herbicide applications
Video: Introduction to Breast Cancer

For a complete list of videos, visit our video library