Multiple Choice
If ABC Inc.and XYZ Inc.have returns that are perfectly positively correlated:
A) Adding XYZ Inc to a portfolio that consists of only ABC Inc.will reduce risk.
B) Adding ABC Inc to a portfolio that includes only XYZ Inc.will increase risk.
C) Adding XYZ Inc.to a portfolio that consists of only ABC Inc.will neither increase nor decrease the risk of the portfolio.
D) Adding XYZ Inc to a portfolio that consists of only ABC Inc.will neither increase nor decrease idiosyncratic risk but will lower systematic risk.
Correct Answer:
Verified
Correct Answer:
Verified
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