Which One of These Statements Is Correct Regarding a Portfolio

question 54

Multiple Choice

Which one of these statements is correct regarding a portfolio of two risky securities?

• A)Both the rate of return and the standard deviation of a portfolio can be changed by changing the portfolio weights.
• B)The opportunity set is represented by a forward bending curve when expected returns are graphed against standard deviation.
• C)Diversification occurs when the correlation between two securities is +1.
• D)The standard deviation of a portfolio cannot be lower than the weighted average standard deviation of the securities held within the portfolio.
• E)The minimum variance portfolio of two stocks also represents the portfolio's highest possible rate of return.

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Definitions:

Net Present Value

Net present value (NPV) is a financial metric used to evaluate the profitability of an investment, calculated by subtracting the initial investment from the sum of all future cash flows discounted back to their present value.

Future Net

Refers to projected future networks or internet technologies that aim to surpass the current capabilities and standards.

Present Values

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Operating Income

Earnings from a company's core business operations, excluding non-operating income and expenses, taxes, and interest.