The Standard Deviation and Expected Returns for 4 Portfolios (A,B,C,and

question 10

Multiple Choice

The standard deviation and expected returns for 4 portfolios (A,B,C,and D) are graphed on the following efficient frontier: Which of the following portfolios are efficient?

• A) A and C only
• B) B and D only
• C) B only
• D) All are efficient

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Definitions:

Call Option

A financial contract that gives the holder the right, but not the obligation, to buy a stock, bond, commodity, or other assets at a specified price within a specific time period.

Cash Flow Hedge

A cash flow hedge is a hedging strategy used to manage exposure to variability in cash flows associated with a particular risk, typically related to interest rates, commodity prices, or currency exchange rates.

British Pounds

The currency of the United Kingdom, which is one of the world's major currencies used for international trade and investment.

Forward Contract

A tailored agreement between two entities to purchase or sell a specific asset at a predetermined price on a future date.