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You are considering investing in two stocks to form a portfolio. You are very risk averse (you do not like risk). Which one of the following stock combinations will you choose for your portfolio (these are your only options)?
Answer
Stocks C & D which both have a beta of 2.0.
Stocks A & B which have correlation coefficient of -1.0.
Stocks G & H which have a correlation coefficient of +1.0.
Stocks E & F which have a correlation coefficient of 0 (zero).

Changes in interest rates represent the type of risk which can be categorized as:
Answer
Unsystematic risk
Firm-specific risk
Non-diversifiable risk
Economics risk

 

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