Answer the following statements true (T) or false (F)
1) A portfolio combining two assets with less than perfectly positive correlation can reduce total risk to a level below that of either of the components.
2) Uncorrelated assets have correlation coefficient close to zero.
3) Combining uncorrelated assets can reduce risk—not as effectively as combining negatively correlated assets, but more effectively than combining positively correlated assets.
4) A firm has high sales when the economy is expanding and low sales during a recession. This firm's overall risk will be higher if it invests in another product which is counter cyclical.
5) A portfolio combining two assets whose returns are less than perfectly positive correlated can increase total risk to a level above that of either of the components.
1) TRUE
2) TRUE
3)TRUE
4) FALSE
5) FALSE
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