-Refer to the Above Graph

question 9

Multiple Choice

-Refer to the above graph.The crowding-out effect would be illustrated by a:

• A) shift from curve A to curve B leading to a decrease in investment.
• B) shift from curve B to curve A leading to a decrease in interest rates.
• C) movement from point 1 to point 2 on curve A leading to a decrease in investment.
• D) movement from point 2 to point 1 on curve A leading to a decrease in investment.

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Definitions:

Expected Return-Beta Relationship

The concept that the expected return of an investment is dependent on its beta, which measures its systemic risk relative to the overall market.

Efficient Frontier

Graph representing a set of portfolios that maximize expected return at each level of portfolio risk.

Market Portfolio

The portfolio encompassing all assets in which each asset is held in proportion to its market value.

Beta

The measure of the systematic risk of a security. The tendency of a security’s returns to respond to swings in the broad market.