When an individual adds securities to their portfolio that are less than perfectly positively correlated, they benefit from Blank______.Multiple choice question.diversificationconsolidationthe coinsurance effectconglomeration

Even if the portfolio is well diversified, the investor is still exposed to Blank______ risk.Multiple choice question.systematicmeanmultipliedunknown

Which of the following statements is incorrect?Group of answer choicesIf two assets with return correlation coefficients less than one make up a portfolio, then the portfolio takes advantage of diversification benefits.If you were to completely diversify your portfolio by purchasing a portion of every asset in the investment universe, then the expected return of your portfolio is equal to the risk-free rate.Diversification cannot be a hedging tool for systematic risk.If you are trying to determine whether to purchase Security A or Security B as the only holding in your portfolio, then you can consider the coefficient of variation in order to understand the risk-return relationship of the individual securities.If the price of an asset has increased since the original purchase of the asset, then the total return of the asset (if no dividends were paid during the period) is equal to the capital appreciation component return.

Which of the following statement is false?Group of answer choicesThe risk of a well-diversified portfolio depends on the market risk of the securities included in the portfolio.The variability of a well-diversified portfolio mostly reflects the contributions to risk from the standard deviations of the stocks within that portfolio.If returns on two stocks tended to move in opposite directions, then the covariances and correlations on the two stocks would be negative.Diversification can reduce portfolio risk even in the case when correlations across stock returns equal zero.

When a firm is in financial distress, the shareholders have an incentive to Blank______.Multiple choice question.engage in activities that reduce riskinvest in safer projectsavoid investing in risky projectsinvest in risky projects

______ risk is reduced as more securities are added to the portfolio.Multiple select question.MarketwideDiversifiableUnsystematicCompany-specific