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:

Differentiated Product

Goods or services that are distinguished from similar products by characteristics like quality, design, brand, or attributes.

Monopolistically Competitive Industry

A market structure characterized by many firms selling products that are similar but not identical, allowing for significant product differentiation.

Barriers to Exit

Factors that prevent or discourage a company from leaving a market or industry, such as high shutdown costs or contractual obligations.

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded by consumers over a specific period.