It is possible to combine two securities to create a risk-free portfolio if the correlation between...
It is possible to combine two securities to create a risk-free portfolio if the correlation between their returns is
a. +1 b. 0 c. +1 or −1 d. +1, 0, or−1
The following type of portfolio requires no trading:
a. buy and hold b. re-balanced c. equal weighted d. optimal
Homework Answers
To create risk free portfolio of two securities correlation shall be 1 or -1. If correlation is 0 then there will be no relation between the two securities.
Answer: Option C.
--------------------------------------------------
Trading is done for the intention of short term profit. If we take position of buy and hold then there will be no trading.
Answer: Option A.
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It is possible to combine two securities to create a risk-free
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The annual risk free rate is 4%
USE FORMULAS
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