In Theory, Which of These Is a Combination of Securities

question 41

Multiple Choice

In theory, which of these is a combination of securities that places the portfolio on the efficient frontier and on a line tangent from the risk-free rate?

• A) efficient market
• B) market portfolio
• C) probability distribution
• D) stock market bubble

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Definitions:

Opportunity Costs

The value of the best alternative foregone when a decision is made to pursue a particular action, essentially the cost of choosing one option over another.

Implicit Costs

The opportunity costs of using resources owned by the firm for its own production, instead of earning income elsewhere.

Explicit Costs

Direct, out-of-pocket payments made for the operation of a business, such as wages, rent, and materials.