In Theory, This Is a Combination of Securities That Places

question 49

Multiple Choice

In theory, this is a combination of securities that places the portfolio on the efficient frontier and on a line tangent from the risk-free rate.

• A) efficient market
• B) market portfolio
• C) probability distribution
• D) stock market bubble

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Definitions:

Mean

The arithmetic average of a set of values, calculated by adding all the values together and dividing by the number of values.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values; a low standard deviation means the values are close to the mean, while a high standard deviation means the values are dispersed over a wider range.

Standard Normal Random Variable

A random variable with a mean of zero and a variance of one, following the standard normal distribution.

Area

The measure of the extent of a two-dimensional surface or shape, expressed in square units.