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

question 361

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:

ECT

Electroconvulsive Therapy, a psychiatric treatment in which seizures are electrically induced in anesthetized patients to provide relief from mental disorders.

Anesthetic

Anesthetic is a substance that induces insensitivity to pain and is used for medical procedures to alleviate discomfort.

Cognitive Side Effects

Adverse impacts on cognitive functions, such as memory, attention, or thought processes, usually associated with medication, treatments, or illness.

Hans Eysenck

A psychologist known for his research in personality theory and the biological basis of personality, including the development of a three-dimensional hierarchy of traits.