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:

Veracity

The adherence to the truth; a fundamental principle in ethics focusing on honesty and accuracy.

Fidelity

The degree of accuracy or faithfulness with which something reproduces a sound, image, or idea, or the loyalty towards commitments or obligations.

Autonomy

The right or condition of self-government; in personal terms, the capacity to make an informed, uncoerced decision.

Veracity

A principle in ethics that emphasizes truthfulness and accuracy, ensuring honesty in communications and actions.