International Portfolio constructed of diversified international securities
A) is adding foreign exchange risk to the portfolio and increasing the total risk because the assets are less than perfectly correlated.
B) has total return identical to the return of the domestic portfolio.
C) is less complex than the domestic portfolio because of less portfolio composition and diversification possibilities.
D) None of the above

Question

Quizplus · Accepted Answer

An international portfolio can reduce total risk through diversification because international assets are less than perfectly correlated with domestic assets. It does not have identical returns to a domestic portfolio, nor is it less complex.

International Portfolio Constructed of Diversified International Securities