Q139
Owning two securities instead of one will not reduce the risk taken by an investor if the two securities are______________.
A.
perfectly positively correlated with each other
AnswerB.
perfectly independent of each other
C.
perfectly negatively correlated with each other
D.
of the same category, eg blue chips
Answer: Option A
Solution
Answer: Option A
Solution:
Owning two securities instead of one will not reduce the risk taken by an investor if the two securities are perfectly positively correlated with each other. The term "security" is a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly-traded corporation via stock a creditor relationship with a governmental body or a corporation represented by owning that entity's bond or rights to ownership as represented by an option.