When a Portfolio Consists of Only a Risky Asset and a Riskless

question 28

Multiple Choice

When a portfolio consists of only a risky asset and a riskless asset,increasing the fraction of the overall portfolio invested in the risky asset will

• A) increase the expected return on the portfolio.
• B) increase the standard deviation of the portfolio.
• C) not change the risk-reward ratio.
• D) neither a,b nor c are true.
• E) a,b and c are all true.

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Definitions:

Current Portion

Refers to the portion of long-term debt or leases that is due to be paid within the next year.

Long-Term Debt

Loans and financial obligations lasting more than one year used by businesses to finance their operations.

Accounts Receivable

Amounts receivable by a business from its clients for goods or services that have already been delivered, but payment is pending.

Inventory

The complete inventory of products and materials that a business keeps for the aim of selling or using in manufacturing.