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:

Constant

A value that remains unchanged and is not affected by other parameters in a given situation.

Catabolism

The metabolic process that breaks down molecules in living organisms, releasing energy.

Cata-

A prefix in medical and general terminology meaning "down," "against," "back," or "deconstructive."

Self

Refers to the individual's sense of their own identity or personal being.