FIN 402 final

. A portfolio with a correlation of +1 is not a well-diversified portfolio. What must you as an investor do to structure a portfolio with negative correlation?

 In order to balance out the +1 correlation, the advisor should add negative correlation stock in the investor’s portfolio but it is recommended to have more positive correlation than negative. This will make the portfolio heavier on the positive correlation

2. What macroeconomic variable do you believe has the greatest impact on interest rates? Inflation? Briefly explain. 

According to our books for this course, money supply plays a major role and impacts the interest rate along with inflation. I remember when I took my Series 6 exam; it was stated in that if FED prints more money, it increases inflation and the way FED controls inflation by increasing or decreasing interest rate.
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