Unformatted text preview: per unit of additional standard deviation. C) The slope of the CAL is also called the rewardtovariability ratio. D) The CAL is also called the efficient frontier of risky assets in the absence of a riskfree asset. E) Both A and D are true. Answer: D Difficulty: Moderate Rationale: The CAL consists of combinations of a risky asset and a riskfree asset whose slope is the rewardtovariability ratio; thus, all statements except d are true. 3. Given the capital allocation line, an investor's optimal portfolio is the portfolio that A) maximizes her expected profit. B) maximizes her risk. C) minimizes both her risk and return. D) maximizes her expected utility. E) none of the above. Answer: D Difficulty: Moderate Rationale: By maximizing expected utility, the investor is obtaining the best riskreturn relationships possible and acceptable for her. Bodie, Investments, Sixth Edition...
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 Spring '10
 PatrickMartinandVitaliAlexeev
 Economics, riskfree asset, capital allocation line

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