If an Investor Has a Portfolio That Has Constant Proportions

question 37

Multiple Choice

If an investor has a portfolio that has constant proportions in T-bills and the market portfolio, the portfolio's characteristic line will plot as a line with ___________. If the investor can time bull markets, the characteristic line will plot as a line with ___________.

• A) a positive slope; a negative slope
• B) a negative slope; a positive slope
• C) a constant slope; a negative slope
• D) a negative slope; a constant slope
• E) a constant slope; a positive slope

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Definitions:

Full Employment

A situation in an economy where all available labor resources are being used in the most efficient way possible, typically associated with low unemployment rates.

Inflation

The tempo at which the collective cost of goods and services rises, impairing the purchasing potential.

Unemployment Insurance

A government program that provides temporary financial assistance to unemployed workers who have lost their jobs through no fault of their own.

Nominal Rate

The interest rate before adjustments for inflation. It is the rate that is quoted by banks and other financial institutions for savings accounts, loans, and mortgages.