You are considering adding a new security to your portfolio.In order to decide whether you should add the security you need to know the security's _______.
I.expected return
II.standard deviation
III.correlation with your portfolio
A) I only
B) I and II only
C) I and III only
D) I, II and III

Question

Quizplus · Accepted Answer

In order to make an informed decision about whether or not to add a security to your portfolio, you need to consider all three factors listed: expected return, standard deviation (which measures the risk of the security), and correlation with your portfolio. Expected return and standard deviation are important for assessing the risk-return trade-off of the security, while correlation with your portfolio helps to ensure adequate diversification. Therefore, the best choice is D, which includes all three factors.

You Are Considering Adding a New Security to Your Portfolio