Returns on systematic risk-free securities (like U.S.Treasury securities)should exhibit what type of correlation with returns on a diversified market wide portfolio of stocks?
A) Nearly perfect correlation
B) Perfect correlation
C) No correlation
D) Unable to tell without specifics about the portfolio

Question

Quizplus · Accepted Answer

Returns on systematic risk-free securities are not affected by the fluctuations in the stock market, therefore they should exhibit no correlation with returns on a diversified market wide portfolio of stocks.

Returns on Systematic Risk-Free Securities (Like U