Theoretically, a Risk-Free Portfolio Could Be Created by Combining Risky

question 335

Multiple Choice

Theoretically, a risk-free portfolio could be created by combining risky securities in a manner that caused the:

• A) Portfolio standard deviation to equal one.
• B) Expected return of the portfolio to equal the market expected return.
• C) Portfolio beta to equal zero.
• D) Risk premium to equal one.
• E) Nondiversifiable risk to be eliminated.

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Definitions:

Paying Cash Dividends

Paying Cash Dividends involves distributing a portion of a company's earnings to shareholders in cash, reflecting a return on investment.

GAAP

A group of standard accounting practices and principles broadly used for reporting financial information.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that serve as a global framework for preparing financial statements.

Balance Sheet

A balance sheet is a financial statement that summarizes a company's financial position at a specific point in time, detailing assets, liabilities, and shareholders' equity.