Microsoft is the only stock in your portfolio. To reduce the risk you decide to add another stock in your portfolio. In fact you pick another stock that has a correlation coefficient of 1 with Microsoft. Which risk do you reduce by adding the second stock to your portfolio?

Microsoft is the only stock in your portfolio. To reduce the risk you decide to add another stock in your portfolio. In fact you pick another stock that has a correlation coefficient of 1 with Microsoft. Which risk do you reduce by adding the second stock to your portfolio?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Microsoft is the only stock in your portfolio. To reduce the risk you decide to add another stock
in your portfolio. In fact you pick another stock that has a correlation coefficient of 1 with
Microsoft. Which risk do you reduce by adding the second stock to your portfolio?
O A. Systematic risk
O B. Company specific risk
O C. Risk free rase risk
O D. Technology risk
OE. None of the above

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