1. You are considering creating a financial portfolio comprising two stocks whic

Question

1. You are considering creating a financial portfolio comprising two stocks which have a correlation of 1 Choose one answer.

A. The portfolio will have a risk level somewhere between the risk of the stock with the lowest risk and the risk of the stock with the highest risk.

B. The portfolio will have a higher risk than the stock with the highest risk.

C. The portfolio will have a lower risk than the stock with the lowest risk.

D. The portfolio will have zero risk as it is a diversified portfolio.

2 You hold two investments in your share portfolio. You hold shares in Oil Ltd currently worth $1,500 as well as shares in Paint Ltd currently worth $3,400. The expected return of Oil Ltd is 12% per annum, and of Paint Ltd is 8% per annum. Estimate the expected return on your portfolio.

Answer: Number

Explanation / Answer

option B is correct, The portfolio will have a higher risk than the stock with the highest risk

it is better to prefer higher risk of the portfolio rather than the highest risk of the stock

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