Reference no: EM132513133

Question 1: Which best defines the term "efficient frontier"?

Select one:

a. The unique portfolio that offers the lowest possible standard deviation versus all the other portfolios

b. Portfolios of risky assets offering the highest return for a given level of risk or the lowest risk for a given level of return

c. The particular combination of the risk free asset and the diversified portfolio of risky assets offering the highest slope

d. The line that defines the decision as to how much money to put in risky assets and much to put into the risk free rate

e. The curved line that connects two stocks in standard deviation expected return space.

Question 2: According to modern portfolio theory, what is the capital market line?

Select one:

a. A line that separates risk into systematic and unsystematic components

b. A frontier of risky assets

c. The particular combination of the risk free asset and the diversified portfolio of risky assets offering the highest slope

d. A line that suggests how much money to put in risky assets and how much to put into risk-free assets

e. The notion that corporate decisions can be separated from the preferences of the individual stockholder