Consider a Portfolio Comprised of Four Risky Securities

question 65

Multiple Choice

Consider a portfolio comprised of four risky securities.Assume the economy has three states with varying probabilities of occurrence.Which one of the following will guarantee that the portfolio variance will equal zero?

• A)The portfolio beta must be 1.0.
• B)The portfolio expected rate of return must be the same for each economic state.
• C)The portfolio risk premium must equal zero.
• D)The portfolio expected rate of return must equal the expected market rate of return.
• E)There must be equal probabilities that the state of the economy will be a boom or a bust.

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Definitions:

Bundle of His

A collection of heart muscle cells specialized for electrical conduction that transmits the electrical impulses from the AV node (atrioventricular node) to the ventricles of the heart.

Purkinje Fibers

Specialized conducting fibers located within the heart's ventricular walls that facilitate electrical impulses for heart contractions.

AV Node

The atrioventricular node, a part of the heart's electrical control system that acts as a gatekeeper for electrical impulses between the atria and ventricles.

Parasympathetic Nerve

Nerves that are part of the autonomic nervous system, responsible for conserving energy and slowing down bodily functions.