You Are Graphing the Investment Opportunity Set for a Portfolio

question 48

Multiple Choice

You are graphing the investment opportunity set for a portfolio of two securities with the expected return on the vertical axis and the standard deviation on the horizontal axis. If the correlation coefficient of the two securities is +1, the opportunity set will appear as which one of the following shapes?

• A)conical shape
• B)linear with an upward slope
• C)combination of two straight lines
• D)hyperbole
• E)horizontal line

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Definitions:

Highly Profitable

Describing a business or activity that generates a significantly higher amount of earnings compared to its costs.

Private Firm

A business owned by private individuals or entities, not traded publicly and not owned by the government.

Good

A tangible item or consumable entity that can satisfy a want, need, or desire, making it useful or enjoyable to consumers.

Securities and Exchange Commission

A U.S. government agency responsible for regulating the securities markets and protecting investors by enforcing securities laws.