The Capital Allocation Line Provided by a Risk-Free Security and N

question 7

Multiple Choice

The Capital Allocation Line provided by a risk-free security and N risky securities is

• A)the line that connects the risk-free rate and the global minimum-variance portfolio of the risky securities.
• B)the line that connects the risk-free rate and the portfolio of the risky securities that has the highest expected return on the efficient frontier.
• C)the line tangent to the efficient frontier of risky securities drawn from the risk-free rate.
• D)the horizontal line drawn from the risk-free rate.
• E)none of the above.

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Definitions:

ADH

Antidiuretic hormone, a hormone that helps to control the balance of water in the body by affecting the amount of urine the kidneys produce.

Parathyroid Hormone

A hormone secreted by the parathyroid glands that regulates calcium levels in the blood, critical for maintaining bone health and function.

Kidney

An organ in vertebrates that filters waste products from the blood, regulates blood pressure, electrolyte balance, and red blood cell production.

Liver

Largest gland of the body, lying in the upper-right quadrant of the abdomen just inferior to the diaphragm; secretes bile and is of great importance in carbohydrate and protein metabolism and in detoxifying chemicals.