As the Correlation Coefficient Between Two Assets Decreases, the Shape

question 57

Multiple Choice

As the correlation coefficient between two assets decreases, the shape of the efficient frontier

• A) approaches a horizontal straight line.
• B) bends out.
• C) bends in.
• D) approaches a vertical straight line.
• E) shifts to the right.

---

Definitions:

Economic Theory

An organized set of concepts and principles that aims to explain how economies function and to provide a framework for economic policy decisions.

Anomaly

An anomaly refers to something that deviates from what is standard, normal, or expected, often presenting a challenge to conventional understanding.

Principle

A basic principle or statement that acts as the cornerstone for a belief system or behavior, or as the starting point for a sequence of logical arguments.

Hypothesis

A proposed explanation for a phenomenon, based on limited evidence as a starting point for further investigation.