The Potential Combinations of a Riskfree Lending with a Risky

question 2

Multiple Choice

The potential combinations of a riskfree lending with a risky portfolio results in a plot of expected returns and standard deviations of

• A) straight line with negative slope.
• B) a nonlinear curve with increasing, positive slope.
• C) straight line with positive slope.
• D) a nonlinear curve with a decreasing, negative slope.

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Definitions:

Taking Deposits

The act of receiving funds from customers, under the agreement that the funds will be returned or made available for withdrawal upon the customer's request.

Insurance Companies

Businesses that provide coverage, compensating policyholders for losses in exchange for premiums.

Limited Liability Partnership (LLP)

A limited liability partnership combines the limited liability advantage of a corporation with the tax advantages of a partnership.

General Partnership

A business arrangement where two or more individuals share ownership, as well as the profits, liabilities, and management duties.