Portfolio Optimization & Bond Prices in R Flashcards
Which of the following statements about the minimum-variance frontier is CORRECT?
Question 1Answer
a.
The minimum-variance frontier only includes high-risk portfolios.
b.
It represents portfolios with the highest risk and return.
c.
All portfolios on the minimum-variance frontier are equally efficient.
d.
It includes portfolios that offer the best risk-return combinations from the global minimum-variance portfolio and upward.
D
What does the minimum-variance point on the efficient frontier represent?
Question 2Answer
a.
The portfolio with the highest return.
b.
The portfolio with the maximum risk.
c.
The portfolio with the minimum level of risk.
d.
The point where the portfolio’s return equals the risk-free rate.
C
What happens to the portfolio opportunity set when the correlation between two assets is 1 (perfectly positive)?
Question 3Answer
a.
It becomes limited to the individual assets only, with no diversification benefits.
b.
It expands to include a wider range of risk-return combinations.
c.
It offers the maximum advantage from diversification.
d.
The opportunity set remains unchanged regardless of the correlation.
A
What will be the output of the following R code? sumSq <- function(a, b) { a^2 + b^2 } sumSq(2, 3)
Question 4Answer
a.
[1] 5
b.
[1] 9
c.
[1] 13
d.
[1] 6
C
What does a negative correlation between assets in a portfolio imply?
Question 5Answer
a.
It indicates that the assets have no impact on each other’s performance.
b.
It means that one asset’s gains will perfectly offset the other’s losses.
c.
It suggests an increased risk of the portfolio.
d.
It indicates that the assets move in the same direction.
B
In terms of risk, how does a well-diversified portfolio compare to individual assets?
Question 6Answer
a.
It typically has lower risk than individual assets.
b.
The risk level is unrelated to that of individual assets.
c.
It has the same level of risk as the most risky individual asset.
d.
It has higher risk than individual assets.
A
In portfolio theory, what is the primary goal of diversification?
Question 7Answer
a.
To reduce unsystematic risk by investing in a variety of assets.
b.
To ensure that the portfolio contains only high-return assets.
c.
To focus exclusively on low-risk assets.
d.
To maximize the returns of the portfolio irrespective of risk.
A
What is the correct way to define a function in R that calculates the cube of a number?
Question 8Answer
a.
function cube(x) = x^3
b.
cube(x) <- x^3
c.
cube <- function(x) { x * x * x }
d.
cube = x => x^3
C?
Gemini got this one wrong
What will be the output of the following R code? f <- function(x) { x^2 } f(4)
Question 9Answer
a.
[1] 8
b.
[1] 4
c.
[1] 16
d.
[1] 2
C
What will be the output of the following R code? f <- function(x) { if (x > 10) “Greater” else “Smaller” } f(15)
Question 10Answer
a.
[1] “Smaller”
b.
[1] “Equal”
c.
[1] “Greater”
d.
[1] 15
C
In a portfolio, what does a higher reward-to-volatility ratio (Sharpe ratio) indicate?
Question 11Answer
a.
Lower overall portfolio performance.
b.
Greater risk compared to the returns.
c.
Better trade-off between risk and return.
d.
Higher volatility and lower returns.
C
Which of the following best describes the risk-return trade-off in portfolio theory?
Question 12Answer
a.
Risk and return are independent of each other.
b.
Risk is always constant regardless of return.
c.
Higher risk is associated with lower potential returns.
d.
Higher risk is associated with higher potential returns.
D
Consider the following function in R. What does it return when called with power(2, 3)? power <- function(x, n) {x^n}
Question 13Answer
a.
6
b.
4
c.
8
d.
9
C
What does the Sharpe ratio primarily measure in a portfolio?
Question 14Answer
a.
The correlation between the assets in the portfolio.
b.
The total expected return of the portfolio.
c.
The performance of the portfolio by adjusting for its risk.
d.
The weight of each asset in the portfolio.
C
What will be the output of this R function when called as divide(10, 2)? divide <- function(x, y) {x / y}
Question 15Answer
a.
2
b.
12
c.
20
d.
5
D
What does the Global Minimum Variance Portfolio (GMVP) represent on the efficient frontier?
Question 16Answer
a.
The point where the portfolio’s return is maximized.
b.
The portfolio with the highest return for a given level of risk.
c.
The portfolio with the highest Sharpe ratio.
d.
The portfolio with the least risk across all possible portfolios.
D
What is the Sharpe ratio used for in portfolio theory?
Question 17Answer
a.
To identify the correlation between different assets in a portfolio.
b.
To measure the performance of a portfolio by adjusting for its risk.
c.
To determine the exact weight of assets in a portfolio.
d.
To calculate the total expected return of a portfolio.
B
What will be the output of the following function when called as calculateModulus(9, 4)? calculateModulus <- function(a, b) {a %% b}
Question 18Answer
a.
4
b.
1
c.
5
d.
2
B
Your portfolio contains 25% of stock A, 35% of stock B, and 40% of stock C. Assume that stock A earned a 4% return, stock B earned 5% return, stock C earned 3% return this year. Which of the following codes is CORRECT to calculate total portfolio return this year?
Question 19Answer
a.
0.25 * 0.04 + 0.35 * 0.05 + 0.4 * 0.03
b.
0.254% + 0.355% + 0.4*3%
c.
25%3% + 35%5% + 40%*3%
d.
25%0.03 + 35%0.05 + 40%*0.03
A
What is the implication of a high Sharpe ratio for a portfolio?
Question 20Answer
a.
The portfolio has a high level of risk relative to its return.
b.
The Sharpe ratio has no implication on a portfolio’s performance.
c.
The portfolio is entirely composed of risk-free assets.
d.
The portfolio offers a better return per unit of risk.
D
In a portfolio, what does the Capital Allocation Line (CAL) represent when combined with a risk-free asset?
Question 21Answer
a.
The set of portfolios that offer the best possible trade-off between risk and return.
b.
The relationship between the returns of the risk-free asset and the market portfolio.
c.
The line connecting all portfolios with the same level of risk.
d.
A line that represents the highest risk portfolios available.
A
What is the impact of a perfectly hedged position in a portfolio?
Question 22Answer
a.
It increases the portfolio’s expected return without affecting risk.
b.
It achieves a portfolio standard deviation of zero.
c.
It has no significant impact on the portfolio’s risk or return.
d.
It results in the highest possible portfolio standard deviation.
B
What will be the output of the following function when called as sayMessage(“Hello”)? sayMessage <- function(message) {paste(“The message is:”, message)}
Question 1Answer
a.
“The message is: Hello”
b.
“sayMessage Hello”
c.
“The message is:”
d.
“Hello”
A
Which outcome is most likely when investing in a portfolio with assets that have high positive correlation?
Question 2Answer
a.
Limited diversification benefits.
b.
Decreased overall risk of the portfolio.
c.
Increased diversification benefits.
d.
Transformation of unsystematic risk into systematic risk.
A
In the context of asset allocation with stocks, bonds, and bills, what does a lower correlation between assets indicate?
Question 3Answer
a.
Increased portfolio risk.
b.
Higher potential benefit from diversification.
c.
Decreased overall returns.
d.
Perfect hedging opportunity.
B
In portfolio theory, what impact does adding hedge assets to a portfolio typically have?
Question 4Answer
a.
It only affects the portfolio’s expected return, not its risk.
b.
It increases the total risk of the portfolio.
c.
Hedge assets have no impact on portfolio risk.
d.
It is particularly effective in reducing total risk.
D
What does a covariance of zero between two assets in a portfolio imply?
Question 5Answer
a.
The assets have no linear relationship in their returns.
b.
The assets have identical variances.
c.
The assets are inversely correlated.
d.
The assets are perfectly correlated.
A
What is the primary effect of including a risk-free asset in a portfolio of risky assets?
Question 6Answer
a.
It creates an opportunity to form a Capital Allocation Line (CAL).
b.
It decreases the portfolio’s expected return.
c.
It has no significant effect on the portfolio’s risk or return.
d.
It increases the overall risk of the portfolio.
A
What does a negative Sharpe ratio indicate about a portfolio’s performance?
Question 7Answer
a.
The portfolio is outperforming the market.
b.
The portfolio has no systematic risk.
c.
The portfolio’s return is less than the risk-free rate of return.
d.
The portfolio has a higher risk compared to its return.
C
What is the significance of the Sharpe ratio in evaluating a portfolio?
Question 8Answer
a.
It measures the portfolio’s return without considering risk.
b.
It evaluates the risk-adjusted return of the portfolio.
c.
It calculates the correlation between the portfolio’s assets.
d.
It assesses the portfolio’s risk without considering return.
B
What would be the output of the following R code? lFunc <- function(v) { length(v) } lFunc(c(1, 2, 3, 4, 5))
Question 9Answer
a.
[1] 2
b.
[1] 10
c.
[1] 5
d.
[1] 1
C
What will be the output of the following R function when called as sqRoot(9)? sqRoot <- function(x) {sqrt(x)}
Question 10Answer
a.
18
b.
3
c.
9
d.
81
B
What is the impact of a perfectly negative correlation (correlation coefficient = -1) between two assets in a portfolio?
Question 11Answer
a.
It leads to the highest possible portfolio standard deviation.
b.
It increases the expected return of the portfolio.
c.
It eliminates the possibility of diversification.
d.
It allows the construction of a portfolio with zero variance.
D
What does it mean when two assets in a portfolio have a correlation coefficient of -1?
Question 12Answer
a.
The correlation coefficient is irrelevant to portfolio construction.
b.
The assets have no correlation.
c.
The assets are perfectly positively correlated.
d.
The assets are perfectly negatively correlated.
D
What is the significance of a Sharpe ratio of zero in a portfolio?
Question 13Answer
a.
It implies that the portfolio has the highest possible risk.
b.
It indicates that the portfolio has no risk.
c.
It signifies that the portfolio’s return is equal to the risk-free rate.
d.
It means the portfolio offers no excess return over the risk-free rate.
D
What does a portfolio’s position on the efficient frontier indicate?
Question 14Answer
a.
The portfolio is immune to market fluctuations.
b.
Its combination of assets guarantees maximum returns.
c.
It represents the lowest risk level for its rate of return.
d.
It is primarily composed of high-risk assets.
C
What does a positive correlation coefficient between two assets in a portfolio indicate?
Question 15Answer
a.
The assets tend to move in opposite directions.
b.
The assets tend to move in the same direction.
c.
The assets move independently of each other.
d.
The correlation has no impact on the movement of assets.
B
Which scenario best illustrates the concept of a ‘perfect hedge’ in portfolio management?
Question 16Answer
a.
A portfolio where all assets move in the same direction.
b.
A portfolio that only includes high-return assets.
c.
A portfolio with assets that have a perfect negative correlation.
d.
A portfolio composed entirely of risk-free assets.
C
Consider a function that uses sapply(). What does sapply() do? applyToVector <- function(v, f) {sapply(v, f)}
Question 17Answer
a.
Splits vector v into smaller vectors and applies f to each.
b.
Applies the function f to each element of vector v and returns a vector.
c.
Summarizes the vector v using the function f.
d.
Sorts the vector v using the function f.
B
What will be the output of the following function when called as sumEven(c(1, 2, 3, 4, 5))? sumEven <- function(numbers) {sum(numbers[numbers %% 2 == 0])}
Question 18Answer
a.
6
b.
5
c.
10
d.
9
A
What will be the output of the following function when called as aNum(5, 3)? aNum <- function(a, b) {sum <- a + b return(sum)}
Question 19Answer
a.
8
b.
3
c.
15
d.
5
A
What would be the output of the following code? stringFunc <- function(s) { paste(“Hello”, s) } stringFunc(“World”)
Question 20Answer
a.
“World Hello”
b.
“Hello”
c.
“Hello World”
d.
“World”
C
In portfolio theory, what does a Sharpe ratio greater than 1 typically indicate?
Question 21Answer
a.
The portfolio has a high level of unsystematic risk.
b.
The portfolio is underperforming the market.
c.
The portfolio is providing adequate return for its level of risk.
d.
The portfolio’s return is lower than the risk-free rate.
C
What role does the global minimum-variance portfolio play in the efficient frontier?
Question 22Answer
a.
It is considered the optimal portfolio for risk-averse investors.
b.
It represents the portfolio with the highest possible risk.
c.
It is the point on the efficient frontier with the lowest return.
d.
It marks the portfolio with the highest expected return.
A
Which statement is true regarding the Capital Allocation Line (CAL) and the efficient frontier?
Question 1Answer
a.
The CAL is a straight line that represents portfolios of only risky assets.
b.
The CAL is irrelevant when considering the efficient frontier.
c.
The CAL always intersects the efficient frontier at the point of highest risk.
d.
The CAL represents all possible combinations of the risk-free asset and a single portfolio on the efficient frontier.
D
What is a key characteristic of a portfolio on the efficient frontier?
Question 2Answer
a.
It offers the highest return for a given level of risk.
b.
It consists solely of the highest returning assets.
c.
It contains only risk-free investments.
d.
It guarantees no loss of principal.
A
How is the optimal risky portfolio determined in the context of the Capital Allocation Line (CAL)?
Question 3Answer
a.
It is the point on the CAL with the highest expected return.
b.
It is the portfolio on the CAL with the highest Sharpe ratio.
c.
It is determined by the portfolio with the largest number of assets.
d.
It is where the CAL intersects the risk-free rate.
B
What does the following R function do? isEv <- function(x) {x %% 2 == 0}
Question 4Answer
a.
Returns TRUE if x is odd
b.
Returns TRUE if x is even
c.
Multiplies x by 2
d.
Divides x by 2
B
What impact does the introduction of a risk-free asset have on the efficient frontier of risky assets?
Question 5Answer
a.
It eliminates the efficient frontier completely.
b.
The efficient frontier becomes irrelevant with a risk-free asset.
c.
It creates a new set of portfolios that dominate the efficient frontier.
d.
The efficient frontier shifts to include only high-risk portfolios.
C
In terms of portfolio diversification, what is generally true as more assets are added to a portfolio?
Question 6Answer
a.
Adding more assets has no impact on the portfolio’s risk.
b.
The portfolio’s total risk increases.
c.
Diversification benefits increase, reducing nonsystematic risk.
d.
Diversification benefits decrease as more assets are added.
C
How does the inclusion of a risk-free asset affect the efficient frontier?
Question 7Answer
a.
It shifts the efficient frontier downwards.
b.
It eliminates the need for an efficient frontier.
c.
It has no significant effect on the efficient frontier.
d.
It moves the efficient frontier to the left and upwards.
D
How is the optimal portfolio determined on the Capital Allocation Line (CAL)?
Question 8Answer
a.
Based on the portfolio with the maximum Sharpe ratio on the CAL.
b.
By opting for the portfolio with the highest expected return, regardless of risk.
c.
Selecting the portfolio with the lowest standard deviation on the CAL.
d.
By choosing the portfolio with the highest possible risk.
A
What would be the output of the following code in R? sFunc <- function(x) { sum(1:x) } sFunc(5)
Question 9Answer
a.
[1] 10
b.
[1] 20
c.
[1] 5
d.
[1] 15
D
What will be the output of the following R code? func <- function(x) { x^2 - 2*x + 1 } func(4)
Question 10Answer
a.
[1] 7
b.
[1] 17
c.
[1] 5
d.
[1] 9
D
What does a higher Sharpe ratio indicate about a portfolio’s performance?
Question 11Answer
a.
It shows that the portfolio is heavily weighted towards high-risk assets.
b.
It suggests a lower return per unit of risk.
c.
It indicates a higher level of risk relative to its return.
d.
It reflects a better risk-adjusted performance.
D
How does the correlation coefficient affect the standard deviation of a portfolio?
Question 12Answer
a.
The correlation coefficient does not affect the standard deviation of a portfolio.
b.
Lower correlation between assets generally leads to lower portfolio standard deviation.
c.
Higher correlation always leads to lower portfolio standard deviation.
d.
The standard deviation is always the weighted average of the component standard deviations.
B
What does the variance of a portfolio depend on according to modern portfolio theory?
Question 13Answer
a.
It is always equal to the weighted average of the individual asset variances.
b.
Solely on the variances of individual assets in the portfolio.
c.
Only on the expected returns of the assets in the portfolio.
d.
On the weights of the assets, their individual variances, and their covariances.
D
In the context of portfolio theory, what does a positive covariance between two assets indicate?
Question 14Answer
a.
The assets move in the same direction.
b.
The assets have identical returns.
c.
The assets move in opposite directions.
d.
The covariance has no impact on the direction of asset movements.
A
Which of the following creates a function in R that calculates the square of a number?
Question 15Answer
a.
def square(x): x * x
b.
function square(x) { return x * x }
c.
square(x) => x^2
d.
square <- function(x) { x ^ 2 }
D
What will be the output of the following function when called as calculateDifference(8, 3)? calculateDifference <- function(a, b) {diff <- abs(a - b) return(diff)}
Question 16Answer
a.
11
b.
24
c.
3
d.
5
D
In terms of diversification, what is the impact of adding more assets to a portfolio?
Question 17Answer
a.
It leads to a proportional increase in the portfolio’s risk.
b.
It generally reduces the portfolio’s unsystematic risk.
c.
It has no impact on the risk or return of the portfolio.
d.
It decreases the portfolio’s expected return.
B
What happens to the variance of a two-asset portfolio when assets are less than perfectly correlated?
Question 18Answer
a.
The variance is a weighted average of the individual asset variances.
b.
The variance is always equal to the sum of the individual asset variances.
c.
Variance is reduced compared to the individual asset variances.
d.
Variance increases as the correlation between the assets decreases.
C
What will the following function return when called as incVector(c(1,2,3))? incVector <- function(vec) {vec + 1}
Question 19Answer
a.
c(0, 1, 2)
b.
c(2, 3, 4)
c.
4
d.
c(1, 2, 3)
B
How does the introduction of a risk-free asset affect the efficient frontier of risky assets?
Question 20Answer
a.
The risk-free asset has no impact on the efficient frontier.
b.
It shifts the efficient frontier to include only high-risk portfolios.
c.
It makes the efficient frontier irrelevant.
d.
It leads to the creation of a new set of portfolios that dominate the original efficient frontier.
D
In portfolio theory, what is implied by a positive correlation between two assets?
Question 21Answer
a.
The correlation does not affect the assets’ returns.
b.
The assets tend to move in opposite directions.
c.
The assets have no relationship in their price movements.
d.
The assets move in the same direction.
D
Which of the following is the correct way to define a default value for a parameter in R functions?
Question 22Answer
a.
myFunc <- function(x, y = 1) { … }
b.
myFunc <- function(x, y ? 1) { … }
c.
myFunc <- function(x, y: 1) { … }
d.
myFunc <- function(x, y == 1) { … }
A
What does the following function return when called with prod(5, 4)? prod <- function(a, b) {a * b}
Question 1Answer
a. 20
b. 5
c. 1
d. 9
A
How does the correlation coefficient between assets in a portfolio affect diversification?
Question 2Answer
a.
The correlation coefficient has no impact on the diversification benefits.
b.
Only negative values of the correlation coefficient offer diversification benefits.
c.
Lower values of the correlation coefficient, including negative values, offer greater potential benefits from diversification.
d.
Higher values of the correlation coefficient always lead to greater diversification benefits.
C
What is the key characteristic of the Capital Allocation Line (CAL) when a risk-free asset is introduced?
Question 3Answer
a.
The CAL has no relevance in the presence of a risk-free asset.
b.
It represents the highest risk portfolios available.
c.
It signifies portfolios with the lowest possible returns.
d.
The CAL is tangent to the efficient frontier at the optimal portfolio.
D
How is the optimal portfolio on the efficient frontier typically determined?
Question 4Answer
a.
Through the portfolio that offers the best trade-off between risk and return.
b.
Based on the portfolio with the lowest risk.
c.
By choosing the portfolio with the most assets.
d.
By selecting the portfolio with the highest return irrespective of risk.
A
What does the following R function do? aNum <- function(x, y) {return(x + y)}
Question 5Answer
a.
Adds x and y.
b.
Multiplies x and y.
c.
Divides x by y.
d.
Subtracts y from x.
A
What does a Sharpe ratio less than 1 indicate about a portfolio’s performance?
Question 6Answer
a.
The portfolio’s return is equal to the risk-free rate.
b.
The portfolio’s return is less than the risk-free rate.
c.
The portfolio is offering less return per unit of risk than a portfolio with a Sharpe ratio greater than 1.
d.
The portfolio has a high level of systematic risk.
C
In the context of portfolio optimization, what does a higher Sharpe ratio signify?
Question 7Answer
a.
A less desirable risk-return trade-off.
b.
An increased likelihood of portfolio underperformance.
c.
A portfolio with higher risk and lower returns.
d.
A better trade-off between risk and return.
D
What will be the output of the following function when called as isP(5)? isP <- function(n) {if (n <= 1) return(FALSE) for (i in 2:(n - 1)) { if (n %% i == 0) return(FALSE)} return(TRUE)}
Question 8Answer
a.
FALSE
b.
NULL
c.
TRUE
d.
Error
C
Suppose you invest in $2,000 into your mutual fund account on March 1st, 2020. Which of the following codes is CORRECT to calculate the account balance at the end of May, 2020 if you earn a 3% return in March, a 2% return in April, and a 5% return in May, 2020?
Question 9Answer
a.
2000 * (0.03) * (0.02) * (0.05)
b.
2000 * (1.03) * (1.02) * (1.05)
c.
2000 * (0.03+0.02+0.05)
d.
2000 * (1.03+1.02+1.05)
B
In portfolio construction, what is the significance of assets with a high positive correlation?
Question 10Answer
a.
They reduce the overall risk of the portfolio.
b.
They limit the benefits of diversification.
c.
They ensure the highest returns in the portfolio.
d.
They offer the best diversification benefits.
B
What will be the output of the following R code? mFunc <- function(x, y) { max(x, y) } mFunc(3, 7)
Question 11Answer
a. [1] 3
b. [1] 10
c. [1] 5
d. [1] 7
D
What is the result of the following R code snippet? seq(1, 5, by=2)
Question 12Answer
a.
[1] 1 2 3 4 5
b.
[1] 1 2 3
c.
[1] 2 4
d.
[1] 1 3 5
D
What is the effect of adding a risk-free asset to a portfolio of risky assets?
Question 13Answer
a.
It increases the portfolio’s overall risk.
b.
It has no impact on the portfolio’s risk-return profile.
c.
It decreases the expected return of the portfolio.
d.
It allows the construction of Capital Allocation Lines (CALs).
D
In the context of portfolio theory, what is the impact of diversifying investments?
Question 14Answer
a.
Diversifying investments leads to portfolios with higher expected returns and lower standard deviations.
b.
Diversification does not affect the portfolio’s risk-return profile.
c.
Diversification only affects the expected returns, not the standard deviations.
d.
It leads to portfolios with higher expected returns and higher standard deviations.
A
What is the significance of the efficient frontier in modern portfolio theory?
Question 15Answer
a.
It includes all portfolios with the highest possible risk.
b.
It indicates the portfolios with minimum return for a given risk level.
c.
It is used to determine the correlation coefficient between assets.
d.
It represents portfolios that maximize returns for any level of risk.
D?
Gemini got this one wrong
How is the risk (standard deviation) of a single-asset portfolio compared to a diversified portfolio?
Question 16Answer
a.
It is always higher in a single-asset portfolio.
b.
It is the same in both single-asset and diversified portfolios.
c.
It is always lower in a single-asset portfolio.
d.
The comparison depends solely on the type of assets included.
A
What will be the output of the following R function when called as multip(3, 4)? multip <- function(a, b) {a * b}
Question 17Answer
a.
0
b.
12
c.
7
d.
1
B
In portfolio theory, what does the ‘global minimum-variance portfolio’ signify?
Question 18Answer
a.
The portfolio with the highest possible expected return.
b.
The portfolio that consists solely of risk-free assets.
c.
A portfolio that includes only the riskiest assets.
d.
The portfolio with the lowest possible variance across all possible portfolios.
D
What role does the global minimum-variance portfolio play on the efficient frontier?
Question 19Answer
a.
It indicates the portfolio with the highest Sharpe ratio on the efficient frontier.
b.
It represents the portfolio with the highest risk on the efficient frontier.
c.
It is the point on the efficient frontier with the lowest possible risk.
d.
It is the point with the highest return on the efficient frontier.
C
In the context of portfolio theory, what does the Capital Allocation Line (CAL) represent?
Question 20Answer
a.
A line that shows portfolios with the maximum possible risk.
b.
The relationship between risk and return for only risky assets.
c.
The line connecting all individual assets without considering a risk-free asset.
d.
The set of all possible portfolios that include both risky assets and a risk-free asset.
D
What will the following R function output when called as sqAndCu(3)? sqAndCu <- function(x) {list(square = x^2, cube = x^3)}
Question 21Answer
a.
c(square = 9, cube = 27)
b.
c(9, 27)
c.
list(square = 9, cube = 27)
d.
list(9, 27)
C
What does a high positive correlation between portfolio assets imply about diversification benefits?
Question 22Answer
a.
It has no impact on diversification benefits.
b.
Diversification benefits are maximized.
c.
Diversification benefits are minimized.
d.
It indicates perfect diversification.
C
