Statements concerning financial risk

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Reference no: EM13730517

Which of the following statements concerning financial risk is false?

A. Generically, financial risk is related to the probability of a return that is less than expected.

B. If the returns on two investments move in unison (are perfectly positively correlated), combining the two into a portfolio will lower risk.

C. If the returns on two investments move in unison (are perfectly positively correlated), combining the two into a portfolio will not affect risk.

D. In the real world, it is not possible to create a riskless portfolio because all investment returns, to a greater or lesser extent, move with the overall economy.

E. Assume you know for certain that an investment will return negative 10 percent. (In other words, the probability of a negative 10 percent return is 100 percent.) Although the expected return is negative, the investment is riskless.

Reference no: EM13730517

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