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:

Aggregate Expenditure

the total amount of spending on goods and services in an economy during a specific period, including consumption, investment, government spending, and net exports.

Net Exports

The value of a country's total exports minus its total imports, representing its trade balance.

Imports

are goods and services brought into one country from another for sale, often indicating a country's demand for foreign products.

Investment

Allocating financial resources with the intent to produce income or gain profits.