An investor who diversifies by purchasing a 50-50 mix of two stocks that are not perfectly positively correlated will find that the standard deviation of the portfolio is:
A. greater than the standard deviation from holding the same balance in only one of these stocks.
B. the sum of the standard deviations of the two individual stocks.
C. less than the standard deviation from holding the same balance in only one of these stocks.
D. greater than the sum of the standard deviations of the individual stocks.
Answer: C
You might also like to view...
An expansionary fiscal policy
I. includes an increase in government spending. II. includes tax cuts. III. increases a government budget deficit or reduces a government budget surplus. A) I, II, and III B) I and II only C) I and III only D) II and III only
A law requiring the government to balance its budget in each year would serve as an automatic destabilizer
Indicate whether the statement is true or false