Asked by
Timmi Jones
on Nov 03, 2024
Verified
When two risky securities that are positively correlated but not perfectly correlated are held in a portfolio,
A) the portfolio standard deviation will be greater than the weighted average of the individual security standard deviations.
B) the portfolio standard deviation will be less than the weighted average of the individual security standard deviations.
C) the portfolio standard deviation will be equal to the weighted average of the individual security standard deviations.
D) the portfolio standard deviation will always be equal to the securities' covariance.
Portfolio Standard Deviation
A measure of the dispersion of the returns of a portfolio, indicating its risk.
Individual Security
A specific financial instrument, such as a stock or bond, representing an investment in assets or rights to ownership.
- Gain insight into how diversification influences the level of risk in an investment portfolio.
Verified Answer
AJ
Learning Objectives
- Gain insight into how diversification influences the level of risk in an investment portfolio.